Asian Stocks Drop as Japan’s Topix Falls With Commodity Shares

  • H shares tumble to halt longest streak of gains since 2007
  • Commodity companies lead declines among industry groups

Making Sense of Negative Rates and Japan's Economy

Asian stocks fell for a second day, following a retreat in global equities, as commodity producers dropped with oil amid lingering concerns about moderating global growth before central bank policy decisions.

The MSCI Asia Pacific Index sank 1 percent to 130.27 as of 4:05 p.m. in Hong Kong, heading for its biggest decline since May 13 and paring a 0.4 percent advance this week. Optimism that borrowing costs will remain lower for longer amid modest global economic growth is waning as investors grew cautious ahead of a string events in the next two weeks. The looming Federal Reserve and Bank of Japan meetings next week, followed by the vote on Britain’s membership in the European Union, have the potential to roil markets.

“The market is looking at a very small chance of the Fed moving next week,” Chris Green, the Auckland-based director of economics and strategy at First NZ Capital Group Ltd., said by phone. “While that’s been supportive of risk assets, a delay in the Fed rate hike is also a reflection of weaker economic backdrop. Further weakness in U.S. economic data along with the potential for Brexit would be a cause for concern.”

Global equities have rebounded from the lows seen in February as commodities have rallied. Oil has surged more than 90 percent amid unexpected disruptions and a slide in U.S. output, which is under pressure from the Organization of Petroleum Exporting Countries’ policy of pumping without limits.

Japan’s Topix index slid 0.5 percent, after a 1 percent decline on Thursday. The measure dropped 0.5 percent this week. The yen strengthened to 106.73 per dollar on Friday, paring its weekly decline to 0.2 percent.

South Korea’s Kospi index dropped 0.3 percent. Australia’s S&P/ASX 200 Index declined 0.9 percent. New Zealand’s S&P/NZX 50 Index finished little changed. Hong Kong’s Hang Seng Index slipped 1.2 percent as it resumed trading following Thursday’s holiday. Singapore’s Straits Times Index fell 1 percent.

The Philippine Stock Exchange Index slid 0.4 percent after tumbling 2.4 percent at the last minute of trading on Thursday. The country reported on Friday that exports contracted for a 13th straight month in April, mirroring declines in other Asian markets such as Indonesia and South Korea.

H Shares

Markets in China and Taiwan remain shut for a holiday. The Hang Seng China Enterprises Index of mainland companies traded in Hong Kong sank 2.2 percent, ending its longest streak of gains since 2007. The gauge rose 5.9 percent during the nine-day rally, making it the world’s best-performing equity benchmark over the period after gauges in Ukraine and Argentina. Next week, MSCI Inc. will decide whether to include mainland A shares in its international indexes.

Japanese lenders and insurers declined, with Sumitomo Mitsui Financial Group Inc. and Dai-ichi Life Insurance Co. both lost 1.3 percent as yields on Japan’s 10-year government bond fell to a record low, damping the outlook for investment income. 

BHP Billiton Ltd., the world’s biggest mining company and Australia’s top energy producer, slumped 3.9 percent in Sydney after a report the Brazilian police said BHP and partner Vale SA were at fault for a dam disaster that killed 19 people and polluted miles of rivers in the country. Genting Singapore Plc fell 2.6 percent after the Today newspaper said the casino operator cut 400 jobs, reflecting difficult business conditions.

Futures on the S&P 500 Index lost 0.5 percent. The U.S. equity benchmark index slipped 0.2 percent on Thursday, retreating from a 10-month high, as investors evaluated the gauge’s run toward a record amid lingering concerns about the impact of lackluster global growth.

West Texas Intermediate crude for July delivery fell 1.1 percent, heading for its second day of declines, as a rising U.S. dollar countered declining crude stockpiles and disruptions from Canada to Nigeria.

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