By Jonathan Burgos
July 13 (Bloomberg) -- Asian stocks fell, sending the MSCI Asia Pacific Index to an eight-week low, on speculation a U.S. economic recovery will be delayed and as Japan’s Prime Minister called national elections.
Samsung Electronics Co., Asia’s biggest maker of computer- memory chips and flat screens, lost 3.9 percent in Seoul as a U.S. consumer sentiment index fell more than economists estimated. Cathay Financial Holding Co. sank 6.7 percent in Taipei on concern a trade agreement with China will take longer than expected to negotiate. Japan’s Nikkei 225 Stock Average sank 2.6 percent as Prime Minister Taro Aso, whose party is trailing in polls, called an election for Aug. 30.
The MSCI Asia Pacific Index slumped 2.4 percent to 98.20 as of 7:37 p.m. in Tokyo, the lowest level since May 18. The gauge has lost 6.7 percent from an eight-month high on June 12 as optimism for a global economic recovery waned. The index had risen as much as 49 percent from a five-year low on March 9.
“The market did run ahead of itself,” said Diane Lin, a Sydney-based fund manager at Pengana Capital, which oversees about $1.9 billion. “The data we’ve been seeing in the U.S. have not been as strong as the market had been hoping for. We’re still very cautious.”
Taiwan’s Taiex Index tumbled 3.5 percent, the most since April 17. South Korea’s Kospi Index sank 3.5 percent. Hong Kong’s Hang Seng Index lost 2.6 percent. Australia’s S&P/ASX 200 Index declined 1.5 percent, led by Rio Tinto Group, the world’s third-largest mining company, which fell 3.6 percent as commodity prices dropped.
Merger Talks?
Among stocks that advanced today, Daiichi Sankyo Co. rose 2.4 percent after its anti-clotting drug was approved for sale in the U.S. Kirin Holdings Co., Japan’s biggest beverage maker, surged 7.8 percent after the Nikkei newspaper said the company may merge with Suntory Holdings Ltd.
Futures on the U.S. Standard & Poor’s 500 Index fell 0.4 percent, while Treasuries rose as demand for the relative safety of government debt increased. The S&P 500 dropped 0.4 percent on July 10 after the Reuters/University of Michigan preliminary index of consumer sentiment slid to 64.6 in July from the prior month. Economists had estimated the gauge would fall to 70.
“It’s going to be a while before we’re confident we’re going to have a strong, sustainable recovery in place,” U.S. Treasury Secretary Timothy Geithner said in an interview with “CNN’s Fareed Zakaria GPS” show.
Samsung Electronics dropped 3.9 percent to 620,000 won. Li & Fung Ltd., a Hong Kong trading company that sells goods to Wal-Mart Stores Inc., lost 2.2 percent to HK$19.66. Taiwan Semiconductor Manufacturing Corp., the world’s largest maker of customized chips, fell 2 percent to NT$55.
Economic Figures
Disappointing economic data, including worse-than-expected U.S. unemployment figures on July 2, has fanned investor concern that stock gains since March had outpaced prospects for an economic recovery. China’s exports slid 21.4 percent in June from a year earlier, the customs bureau said on July 10 after the market closed, following a record 26.4 percent drop in May.
Japan’s government said on July 8 that machinery orders declined 3 percent in May. Economists had estimated a 2 percent increase. Growth in Japanese bank lending slowed to 2.5 percent last month from a year earlier, compared with 3.3 percent growth in May, the Bank of Japan said on the same day.
“Investor sentiment is drifting because they can’t determine whether a recovery will be fast or slow,” said Yoshinori Nagano, a senior strategist at Tokyo-based Daiwa Asset Management Co., which oversees the equivalent of $90 billion.
Cathay Financial, Taiwan’s largest publicly traded financial services company, declined 6.7 percent to NT$47.70. Fubon Financial Holding Co., the island’s second-largest listed financial services company, slumped 7 percent to NT$30.70.
China, Taiwan Accord
The Taiex Index has gained 44 percent in the past six months on optimism closer ties with China will boost Taiwan’s economic growth.
Negotiations for an economic cooperation agreement with China should begin this year with the signing of a deal next year, Lai Shin-yuan, chairwoman of the Mainland Affairs Council, said in a statement on the council’s Web site yesterday.
“Investors are disappointed by the news; they were expecting the agreement to be signed this year,” Monika Yang, who helps oversee $10 billion at Hamon Asset Management Ltd. in Hong Kong, said by phone. “Now, any good news in the market is overshadowed by this.”
Rio Tinto declined 3.6 percent to A$46.63. Jiangxi Copper Co., China’s biggest producer of the metal, dipped 2 percent to HK$11.98. Cnooc Ltd., the nation’s largest offshore oil producer, lost 2.8 percent to HK$8.81 in Hong Kong.
Drug Approval
A gauge of six metals in London dropped 1.3 percent on July 10, posting a weekly loss of 3.9 percent, the most since the week ended April 24. Crude oil fell 0.9 percent in after-hours trading, extending July 10’s 0.9 percent drop.
Daiichi Sankyo gained 2.4 percent to 1,702 yen. Prasugrel, a drug developed by the company and its partner Eli Lilly & Co., was approved by the Food and Drug Administration on July 10 for sale in the U.S.
Kirin advanced 7.8 percent to 1,392 yen. The company and privately held Suntory are in merger talks, the Nikkei newspaper reported today. Spokespeople for both companies declined to confirm or deny whether the companies were in talks.
Japanese stocks were dragged lower after Prime Minister Aso called the election, with polls indicating his ruling Liberal Democratic Party may lose power for only the second time since 1955. The LDP has lost five successive local elections, including yesterday’s vote for the Tokyo assembly, in which the opposition Democratic Party of Japan won the most seats.
Forty-two percent of people prefer DPJ leader Yukio Hatoyama as prime minister compared with 22 percent for Aso, the Asahi newspaper said in a survey published July 6.
“Investors have no idea on what’s going to happen once the DPJ replaces the LDP and that’s negative for the stock market,” said Hideo Arimura, who oversees the equivalent of $2.2 billion at Mizuho Asset Management Co. “Nobody knows either if a DPJ- led government is better than the LDP for the economy.”
To contact the reporters for this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net.
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