By Shani Raja and Masaki Kondo
June 16 (Bloomberg) -- Asian stocks dropped, sending the MSCI Asia Pacific Index down the most in a month, as commodities fell and investors questioned the pace of the economic recovery.
PetroChina Co., China’s biggest oil producer, sank 2.6 percent in Hong Kong and Rio Tinto Group, the world’s third- largest mining company, lost 3 percent in Sydney as oil and copper fell. Toyota Motor Corp., the No. 1 automaker worldwide, declined 3.4 percent after the yen strengthened and a New York manufacturing report missed estimates. Asia stocks extended a global slump that dragged the MSCI World Index down by the most in two months yesterday.
“Some may have believed that the deterioration of the global economy had ended, but that’s not the case,” said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $52 billion in Tokyo. “Those who bought stocks on a perception the economy would improve are now selling on reality.”
MSCI’s Asia index retreated 1.6 percent to 101.92 as of 7:14 p.m. in Tokyo, the biggest drop since May 14. The gauge has surged 44 percent from a more than five-year low on March 9 amid speculation the global economy is recovering. The index trades at 23.4 times estimated earnings, compared with 14.5 for the Standard & Poor’s 500 Index in the U.S.
Japan’s Nikkei 225 Stock Average fell 2.9 percent to 9,752.88 even as the central bank raised its assessment of the economy for a second month. The Bank of Japan left its benchmark overnight lending rate unchanged at 0.1 percent. Hong Kong’s Hang Seng Index declined 1.8 percent.
Emerging Market
The Kospi Index dropped 0.9 percent in Seoul as MSCI Inc., whose stock indexes are tracked by investors with about $3 trillion in assets, left South Korea unchanged as an emerging market. The country, home to Asia Pacific’s sixth-largest stock market, had been under review for an upgrade to developed status.
Konica Minolta Holdings Inc. slumped 6.6 percent in Tokyo after Credit Suisse Group AG downgraded the printer maker. Australia’s Nufarm Ltd., which supplies farm chemicals, sank 12 percent after cutting its profit target. Among stocks that rose today, Macquarie Communications Infrastructure Group surged 26 percent after receiving an increased takeover bid.
Futures on the S&P 500 dropped 0.2 percent. The gauge slid 2.4 percent yesterday, the most since May 13, as the Federal Reserve Bank of New York’s general economic index fell to minus 9.4 in June from minus 4.6 the previous month. Economists in a Bloomberg survey had expected the gauge to stay unchanged. Readings below zero for the index signal manufacturing is shrinking.
‘Moderate’ Recovery
The New York data were the latest in a string of figures that have made some investors more cautious about economic growth prospects. Japan’s government reported on June 8 that the country’s current-account surplus narrowed in April as exports slumped. Overseas shipments declined 26.4 percent last month from a year earlier, China’s customs bureau said on June 11.
“Investors expected the global economy will recover at a fairly fast pace, but this view is changing to one that a recovery will remain moderate,” said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities Co.
Crude oil declined 2 percent yesterday, falling for a second session. September-delivery copper on the Shanghai Futures Exchange slid as much as 2.2 percent to the lowest for a most-active contract since June 1. Oil recovered from losses in New York electronic trading today, while copper rebounded in London.
PetroChina slumped 2.6 percent to HK$8.76. Cnooc Ltd., China’s largest offshore oil producer, dropped 5.5 percent to HK$9.90. Rio Tinto slumped 3 percent to A$73.23. BHP Billiton Ltd., the world’s biggest mining company, fell 1.5 percent to A$36.46.
Green Shoots
Materials and energy stocks are among the three best performing of the MSCI Asia Pacific Index’s 10 industries in the past month as investors bet demand for raw materials will pick up as the global economy recovers. The International Monetary Fund raised its growth forecast for the U.S. economy yesterday.
“The green shoots of an economic turnaround continue to appear, but the question is whether markets have priced in a bumper harvest,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. “People are now turning their attention to the appropriateness of stock prices.”
Yen Advances
Japanese exporters declined as the New York manufacturing report damped optimism their biggest market is recovering and the yen climbed, cutting the value of sales from abroad. The yen rose to as high as 132.74 against the euro, the strongest level since May 28. The Japanese currency advanced 1.5 percent to 96.35 per dollar, the biggest gain since May 29.
Toyota, which gets 31 percent of its revenue from North America, sank 3.4 percent to 3,700 yen. Sony Corp., the maker of the PlayStation 3, lost 3 percent to 2,550 yen.
The MSCI gauge climbed more than 10 percent for a second month in May, which hasn’t happened since the two months ended 1993. The rally since March has driven the average valuation of companies in the gauge to 1.5 times the book value of assets, the highest level since September, according to Bloomberg data.
Konica Minolta fell 6.6 percent to 976 yen, paring its climb this year to 43 percent. Credit Suisse lowered its recommendation to “underperform” from “neutral” saying the shares may have “overheated.”
Raised Offer
Nufarm tumbled 12 percent to A$10.63 after it cut its earnings forecast on lower-than-expected weed-killer sales.
Macquarie Communications, which invests in television and radio-transmission towers, surged 26 percent to A$2.93. Canada Pension Plan Investment Board raised its offer for the company by 20 percent after shareholders threatened to block the purchase.
Berjaya Sports Toto Bhd., Malaysia’s biggest number-betting operator, rose 5.9 percent to 5.25 ringgit after fourth-quarter net income jumped 67 percent and the company announced a special dividend.
To contact the reporters on this story: Shani Raja in Sydney at sraja4@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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