Asia Stocks Head for Biggest Drop in 7 Weeks Amid Broad Declines

  • Survey shows deterioration in Japanese corporate sentiment
  • Shanghai Composite rebounds on state-buying speculation

Asian stocks headed for the biggest decline in seven weeks as Japanese corporate sentiment deteriorated and a broad-based selloff from consumer-discretionary companies to healthcare engulfed the region’s equities markets.

The MSCI Asia Pacific Index slid 2.3 percent to 126 as of 5:02 p.m. in Tokyo. The gauge climbed 8.2 percent in March, the best month since October, to end a tumultuous quarter for global markets. Equities had rebounded from lows in February as the Federal Reserve reassured investors that it won’t rush to increase borrowing costs.

A stellar performance in March was tested immediately on the first day of the second quarter. Japan’s Topix index lost 3.4 percent, the worst start to a quarter since 2008, after the Tankan index of confidence among large manufacturers missed economist estimates. Panasonic Corp. slumped after forecasting profit will fall.

“After strong gains from their February lows, shares are overbought and vulnerable to a pullback,” said Shane Oliver, head of investment strategy at Sydney-based AMP Capital Investors Ltd., which oversees about $122 billion. “March-quarter Tankan business conditions and confidence readings were disappointing.”

The Tankan index of sentiment among large manufacturers fell to a reading of 6 in the first quarter, the lowest level since mid-2013, from 12 in the previous three months, the Bank of Japan reported Friday. Economists had expected a reading of 8. A positive number means there are more optimists than pessimists among manufacturers.

The Shanghai Composite Index rebounded in late trading as a surprise jump in an official factory gauge increased optimism about the economy and speculation grew state-backed funds intervened to support the market after Standard & Poor’s cut the nation’s credit-rating outlook. The stock measure swung to gains in the last 30 minutes of trading, rising 0.2 percent and erasing a loss of as much as 1.6 percent. China’s financial markets are shut Monday for a holiday.

S&P cut the outlook for China’s credit rating to negative from stable, saying the nation’s economic rebalancing is likely to proceed more slowly than the ratings firm had expected. The reduction may not have much of an impact on the markets as it comes at a time when the nation’s stocks are rallying and the currency is stabilizing, according to Sinopac Securities (Asia) Ltd.

Yen Gains

Japan’s Topix index lost 4.7 percent this week after capping a 13 percent quarterly drop. The yen added 0.3 percent to 112.26 per dollar, souring the earnings outlook for exporters.

Foreign investors were net sellers of Japanese stocks for a 12th straight week in the period ended March 25, according to data released Thursday by Japan Exchange Group Inc. Prime Minister Shinzo Abe said Tuesday that the best way to boost Japan’s economy is to quickly implement the existing budget for the next fiscal year, rejecting speculation he would announce a supplementary spending package.

Australia’s S&P/ASX 200 Index declined 1.6 percent, after jumping 1.5 percent Thursday. New Zealand’s S&P/NZX 50 Index slipped 0.7 percent after closing at a record high a day earlier. South Korea’s Kospi index and Taiwan’s Taiex fell at least 1 percent. Hong Kong’s Hang Seng Index lost 1.3 percent. The Hang Seng China Enterprises Index of mainland stocks traded in the city retreated 1.8 percent after this week re-entering a bull market.

S&P 500 e-mini futures slid 0.4 percent. The underlying gauge edged lower Thursday ahead of a government jobs report. Stocks gained 0.8 percent in the past three months, marking the first time since 1933 that the gauge has finished a quarter with a gain after falling at least 10 percent.

Futures now show no chance of the Fed altering monetary policy this month and only 45 percent odds of a rate increase by November. Policy makers have emphasized that progress in economic data will steer their rate decisions. The government’s monthly jobs report is predicted to show a 205,000 gain with the unemployment rate holding at 4.9 percent.

Before it's here, it's on the Bloomberg Terminal.