By Jonathan Burgos and Patrick Rial
April 27 (Bloomberg) -- Asian stocks and U.S. futures fell on concern the outbreak of swine flu may slow the recovery in the global economy. Treasuries and the yen rose.
Air China Ltd., the country’s largest international carrier, tumbled 13 percent, while Genting Bhd., Asia’s biggest listed casino operator, slumped 4.9 percent on speculation the spread of the disease will hurt tourism in the region. Industrial & Commercial Bank of China lost 4 percent after the Financial Times said Allianz SE and American Express Co. will sell shares in the Chinese lender. The peso slumped 2.3 in Mexico, where swine flu has claimed more than 80 lives.
“Health scares can create anxiety in the market,” said Nader Naeimi, an investment strategist at AMP Capital Investors in Sydney, which manages about $90 billion. “It looks like we’re seeing a bit of a flight to safety. The Asian market’s reacting to big falls in the U.S. futures on fears over the economic impact of swine flu.”
The MSCI Asia Pacific Index fell 0.7 percent to 88.93 as of 2:15 p.m. in Tokyo, reversing an earlier 1.4 percent advance. The measure has rallied 26 percent from a more than five-year low on March 9, taking valuations to the highest since November 2007. Hong Kong’s Hang Seng Index slipped 2.7 percent. All markets declined except New Zealand, Sri Lanka and Vietnam.
Futures on the U.S. Standard & Poor’s 500 Index dropped 1.8 percent, as swine flu threatened to prolong the country’s recession. The S&P 500 gained 1.7 percent on April 24, as the Federal Reserve said most of the country’s banks “have capital levels well in excess of the amounts required to be well capitalized.”
Pessimistic Trading
The yen rose against the dollar and Treasuries advanced as investors sought havens from a prolonged recession. The Japanese currency rose to 96.55 per dollar in Tokyo from 97.17 last week in New York. The price of the 10-year Treasury note rose 3/8, or $3.75 per $1,000 face amount, to 98 9/32.
“The market is returning to pessimism-driven trading,” said Daisuke Uno, chief strategist in Tokyo at Sumitomo Mitsui Banking Corp., a unit of Japan’s third-largest bank. “This means that the yen may be bought.”
The Mexican peso fell 2.3 percent to 13.6480, compared with 13.3405 on April 24. The losses add to last week’s 1.6 percent slide, the biggest weekly drop in two months.
A growing number of swine flu cases in the U.S. and Mexico led the U.S. government to declare a public health emergency and release stockpiles of medicine. Japan, Malaysia and Singapore said they are screening passengers at checkpoints for fever, while Hong Kong raised its swine-flu response level.
Pork Products
Air China shares slumped 13 percent to HK$3.48. Qantas Airways Ltd., Australia’s biggest carrier, dropped 5.1 percent to A$1.88. Singapore Airlines Ltd., the world’s second-biggest carrier by market value, slipped 5.3 percent to S$10.04.
Genting dropped 4.5 percent to 4.66 ringgit in Kuala Lumpur. Star Cruises Ltd., Asia’s biggest cruise operator, sank 7.9 percent to 93 Hong Kong cents.
China Yurun Food Group Ltd., the country’s biggest hog processor, dropped 8.8 percent to HK$9.14. The company said its operations have been unaffected by the outbreak. Sichuan Gaojin Food Co., a Chinese maker of pork products, slumped 7.4 percent to 8.92 yuan in Shenzhen.
Concern that demand for pork and feed grains drove corn futures in Chicago down as much as 3.8 percent, while soybeans slumped 4.9 percent.
Shares of Chugai Pharmaceutical Co., the Japanese unit of Roche Holding AG, surged 14 percent in Tokyo to 1,841 yen, while Top Glove Corp., the world’s largest rubber glove maker, climbed 7.3 percent to 5.90 ringgit in Kuala Lumpur on optimism demand for their products will increase.
Takeover Offers
Japan’s health ministry is checking supplies of influenza treatments and screening travelers from Mexico at airports for fever in response to the swine flu outbreak, Yoshio Namba, head of the office for pandemic influenza, said yesterday in Tokyo.
ICBC slumped 4 percent to HK$4.10. Allianz and American Express will likely raise more than $2 billion selling shares in ICBC, the FT reported, citing people familiar with the situation.
Aozora Bank Ltd., the Japanese lender controlled by Cerberus Capital Management LP, surged 14 percent to 135 yen in Tokyo. The Nikkei newspaper said the bank and Shinsei Bank Ltd., the former Long Term Credit Bank of Japan which collapsed in 1998, are in merger talks with the goal of integrating operations in the summer of 2010. The banks declined to confirm or deny the report. Shinshei jumped 13 percent to 140 yen.
Lion Nathan Ltd. soared 40 percent to A$11.64 after the Australian brewer agreed to a buyout from its largest shareholder, Kirin Holdings Co. Kirin, Japan’s largest beverage maker, fell 2.8 percent to 1,072 yen.
“Buyout activity, especially those that involve cash offers, is helping to buoy the market,” said AMP’s Naeimi. “It signals growing confidence in stock market valuations, as well as in the broader economic backdrop.”
The rally since March has driven the average valuation of the MSCI Asia Pacific Index’s constituents to 19 times reported profit, the highest since November 2007, data compiled by Bloomberg show.
To contact the reporters for this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.
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