By Shani Raja and Masaki Kondo
June 23 (Bloomberg) -- Asian stocks fell, sending the MSCI Asia Pacific Index down by the most in almost six weeks, as concern an economic recovery will be delayed dragged commodity prices lower and spurred demand for the yen as a haven.
BHP Billiton Ltd., the biggest mining company globally, sank 4 percent in Sydney after the World Bank’s forecast of a deeper recession sparked a slump in oil and copper. Japan’s Mitsubishi Corp., a trading company that gets almost half its sales from resources, lost 5.5 percent. Toyota Motor Corp., the world’s largest carmaker, fell 2.2 percent in Tokyo as the strengthening yen diminished the value of overseas revenue and the company said the outlook in the U.S. is “unclear.”
“The World Bank’s report was nothing more than an expedient reason for people to take profit,” said Yoshinori Nagano, who helps oversee the equivalent of $90 billion at Tokyo-based Daiwa Asset Management Co. “During this correction phase, bad news will likely get more attention than good.”
The MSCI Asia Pacific Index sank 2.5 percent to 99.38 as of 2:50 p.m. in Tokyo, the biggest drop since May 14. The gauge has climbed 41 percent from a more than five-year low on March 9, on optimism government stimulus efforts and interest-rate cuts had stemmed the global recession. Valuations of companies in the measure last week were near their highest levels since September.
Hong Kong’s Hang Seng Index fell 3.2 percent, while Japan’s Nikkei 225 Stock Average declined 2.8 percent. Australia’s S&P/ASX 200 Index retreated 3 percent. South Korea’s Kospi Index lost 3 percent, paced by STX Pan Ocean Co., which slumped 8 percent after freight rates declined.
Faltering Growth
Li & Fung Ltd., the biggest supplier of clothes and toys to Wal-Mart Stores Inc., declined 2.9 percent in Hong Kong as the global recovery outlook dimmed. Bearings maker Nachi-Fujikoshi Corp. slumped 4.8 percent in Tokyo on concern it may report losses. The MSCI Asia Pacific Index’s biggest advance today came from Gome Electrical Appliances Holdings Ltd., which soared 77 percent in Hong Kong on plans to raise investor funds.
Futures on the Standard & Poor’s 500 Index rose 0.1 percent. The gauge slid 3.1 percent and Europe’s Dow Jones Stoxx 600 Index lost 2.8 percent yesterday after the World Bank forecast the global economy to contract 2.9 percent this year, compared with a previous forecast of a 1.7 percent decline. The report came during trading hours in Asia.
“The World Bank has ostensibly poured a big jug of ice- cold water over those looking for a bounce in economic growth globally,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. “Given the muted growth outlook, the focus will now switch to the appropriateness of valuations.”
Commodity Prices
A gauge of six metals in London slumped 5.4 percent, the steepest drop since Jan. 27, following the World Bank’s prediction. Crude oil for August delivery in New York tumbled 3.6 percent to settle at $67.50 a barrel yesterday. Oil lost 1.1 percent in after-hours trading.
BHP declined 4 percent to A$33.85. Mitsubishi Corp. sank 5.5 percent to 1,711 yen. Fortescue Metals Group Ltd., the No. 3 iron-ore exporter in Australia, tumbled 9.6 percent to A$3.68.
Woodside Petroleum Ltd., Australia’s second-largest oil company, retreated 2.7 percent to A$40.18. Cnooc Ltd., China’s largest offshore oil producer, slumped 4.3 percent to HK$9.23 in Hong Kong. Japan Petroleum Exploration Co., the nation’s No. 2 oil and gas developer, lost 7 percent to 4,760 yen in Tokyo.
Energy stocks are the worst performing of the MSCI Asia Pacific Index’s 10 industry groups in the past month as investors question the strength of the recovery.
‘Double Whammy’
The global economy may suffer another slump due to the potential “double whammy” of rising oil prices and widening budget deficits, Nouriel Roubini, the New York University economics professor who predicted the financial crisis, told a conference in Paris yesterday.
Li & Fung dropped 2.9 percent to HK$20.40. Esprit Holdings Ltd., a Hong Kong-based clothier that gets over 80 percent of sales from Europe, slid 1.8 percent to HK$45.60.
Nachi-Fujikoshi fell 4.8 percent to 197 yen. The Tokyo- based company may post a 1.5 billion yen ($16 million) operating loss in the six months ended May 31 when it reports results on July 3, the Nikkei English News reported, without saying where the information came from.
A measure of financial companies on MSCI’s Asian index, which rallied 62 percent since March 9, was the biggest drag on the broader gauge amid concern slower economic growth will dent credit growth and swell loan losses.
Loan Losses
National Australia Bank Ltd., Australia’s largest by assets, lost 3.5 percent to A$21.70. HSBC Holdings Plc, Europe’s biggest bank, dipped 2.9 percent to HK$64.65 in Hong Kong.
“Banks were at the epicenter of the global financial crisis and recession,” said Nader Naeimi, a strategist at AMP Capital Investors in Sydney, which manages about $95 billion. “Any bad news on the growth front will hurt their performance, especially after the recent rallies.”
The MSCI Asia Pacific Index declined 3.5 percent last week, its first weekly drop in five, as the rally since March drove the average valuation of companies in the gauge to 1.5 times the net value of assets, according to Bloomberg data. That was the highest level since September.
Government figures last week showed more than one-quarter of American states now have unemployment rates higher than 10 percent, while Britain posted the biggest budget deficit for any month since records began in 1993.
Risk Aversion
Japanese exporters declined as the yen gained against the dollar ahead of a U.S. report tomorrow that may show durable- goods orders declined in May. The yen earlier climbed to 95.29 per dollar, the highest since June 1.
“Worries that the ‘green shoots’ of the global recovery are unlikely to be sustainable may make investors risk averse,” said Hideki Amikura, deputy general manager of foreign exchange in Tokyo at Nomura Trust and Banking Co., a unit of Japan’s largest brokerage. “This will probably lead to yen appreciation.”
Toyota fell 2.2 percent to 3,600 yen. Outgoing President Katsuaki Watanabe told shareholders today that the outlook for a recovery in the U.S. is “still not transparent.”
Honda Motor Co., 45 percent of whose sales are from North America, sank 1.4 percent to 2,550 yen as it said it will cut the number of models sold only domestically to trim costs.
Elpida Memory Inc. lost 4.9 percent to 982 yen. The company may this month receive 30 billion yen ($315 million) in taxpayer money, public broadcaster NHK reported, without saying where it obtained the information. The Japanese chipmaker yesterday applied for public funding to bolster its capital, NHK said.
Baltic Dry Index
STX Pan Ocean, South Korea’s biggest bulk carrier, sank 8 percent to 11,450 won after the Baltic Dry Index, a measure of shipping costs for commodities, fell 1 percent yesterday, as demand cooled for iron-ore carriers.
Korea Line Corp., the second-biggest bulk carrier, lost 7.5 percent to 62,900 won. China Cosco Holdings Co., the world’s largest operator of dry-bulk ships, slumped 6 percent to HK$8.95 in Hong Kong.
Gome, China’s second-biggest electronics retailer, soared 77 percent to HK$1.98 after a seven-month suspension. The company announced plans to raise as much as $447 million from investors including Bain Capital LLC.
To contact the reporter for this story: Shani Raja in Sydney at sraja4@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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