By Patrick Rial and Shani Raja
Aug. 31 (Bloomberg) -- Asian stocks fell, led by mining companies and Japanese exporters, as Chinese companies reported lower profit and the Democratic Party of Japan’s election victory drove the yen higher.
Baoshan Iron & Steel Co. fell 7 percent in Shanghai after first-half profit plunged 93 percent. China Merchants Bank Co. fell 6.3 percent amid plans to increase the size of a rights offer. Canon Inc., which gets 28 percent of its revenue from the Americas, sank 3.3 percent. Japan’s currency gained versus all 16 major counterparts after public broadcaster NHK said the DPJ captured at least 308 of the 480 lower-house seats.
The MSCI Asia Pacific Index lost 0.6 percent to 113.28 as of 3:30 p.m. in Tokyo. The gauge has surged 60 percent from a more than five-year low on March 9 on speculation the global economy is recovering. That’s taken the average price of stocks on the index to 1.5 times book value, close to an 11-month high.
“Stocks have rallied a long way and are technically overbought,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which manages about $75 billion. “We probably need a good correction ahead of the next jump.”
The Shanghai Composite Index slumped 6.2 percent. Industrial Bank Co. slumped 9 percent after Caijing magazine reported that the nation’s banks may have cut new loan growth.
Hong Kong’s Hang Seng Index dropped 1.8 percent, led by China Petroleum & Chemical Corp., which fell 3.9 percent on concern the government will keep fuel prices unchanged to support the economy as crude climbs, squeezing margins.
ANZ Bank, Ibiden
Among stocks that rose today, Australia & New Zealand Banking Group Ltd. jumped 4.1 percent after saying profit rose. Ibiden Co., which supplies printed circuit boards to Intel Corp., climbed 4.4 percent in Tokyo after the U.S. company boosted its sales forecast.
Futures on the U.S. Standard & Poor’s Index fell 0.6 percent. The gauge dropped 0.2 percent on Aug. 28.
Japan’s Nikkei 225 Stock Average lost 0.3 percent, reversing an earlier 2.2 percent climb. Government reports showed factory output rose at the slowest pace in four months in July and retail sales fell, underscoring the challenge for the incoming government to sustain an economic recovery.
The DPJ routed the Liberal Democratic Party in Japan’s national elections, capturing 308 of 480 lower-house seats, national broadcaster NHK said. The DPJ has pledged to revive an economy emerging from its deepest recession since World War II by boosting child-care spending, cutting taxes and limiting the power of bureaucrats.
Worst Performing Index
The Shanghai Composite Index has fallen 21 percent in the past month, making it the world’s worst performing major stock index in that time, as banks reined in lending to avert asset bubbles and policy makers advised industries such as steel and cement to curb overcapacity.
Baoshan Iron fell 7 percent to 6.42 yuan. The company said the “global economy hasn’t recovered substantially and the foundations for a domestic recovery aren’t solid,” threatening prospects for the steel industry.
The rally in Asian stocks since March has been driven in part by profit reports in the past month that have exceeded analyst estimates. Some 35 percent of the 620 companies in the MSCI Asia Pacific Index that have reported net income since early July have beaten analyst predictions, while about 21 percent have missed, according to data compiled by Bloomberg.
China Merchants Bank, the nation’s fifth-biggest by market value, dropped 6.3 percent to 13.62 yuan. The lender posted its third consecutive quarter of declining profits as loan margins contracted and it set aside additional funds for loan defaults.
The Shenzhen-based bank said it will increase the amount raised from its planned rights offer by as much as 22 percent.
Slowing Loan Growth
Industrial Bank, which reported a 4.9 percent decline in first-half profit on Aug. 24, slumped 9 percent to 28.19 yuan.
China may have 200 billion yuan of new loans in August, the Beijing-based Caijing magazine reported today on its Web site. That compares with 355.9 billion yuan in new loans in July and 1.53 trillion yuan in June.
“The local market bears are convinced that tightening is already underway,” said Howard Wang, head of the Greater China team at JF Asset Management, which oversees $50 billion. “Sentiment only can change with either a very strong set of macro numbers in August, laying to rest that tightening will ‘break’ the recovery, or stronger statements from central authorities.”
China Petroleum slumped 3.9 percent to HK$6.41, while PetroChina Co., the world’s most valuable company, sank 1.9 percent to HK$8.64. The government will reduce the number of times it adjusts fuel prices at this “critical juncture” for the economy, the state-run Shanghai Securities News reported Aug. 29.
Stronger Yen
In Tokyo, Canon, which makes digital cameras, sank 3.3 percent to 3,570 yen on concern a stronger yen will hurt the value of overseas sales when repatriated back into the local currency. Honda Motor Co., which gets more than half its sales in North America, dropped 1.8 percent to 2,935 yen.
The yen appreciated to 132.68 per euro following the election results from 133.85 in New York on Aug. 28. The Japanese currency strengthened to 92.77 per dollar from 93.60.
“Some are saying the market has fully reflected the change of government, but the change is too big to be priced in,” said Hisakazu Amano, who helps oversee the equivalent of $18 billion at T&D Asset Management Co. “The impact of the DPJ victory on company earnings is still uncertain and investors can’t decide what to buy or sell.”
ANZ Bank, Australia’s fourth-biggest bank, jumped 4.1 percent to A$21.29. The company said profit in the 10 months ended July climbed from the same period a year earlier after lending grew and bad debts were lower than internal estimates.
Ibiden surged 4.4 percent to 3,310 yen. Rival Shinko Electric Industries Co. rallied 1.5 percent to 1,736 yen.
Intel, the world’s biggest chipmaker, said on Aug. 28 that third-quarter sales will be at least $8.8 billion, compared with at least $8.1 billion projected last month. The stock jumped 4 percent in New York on Aug. 28.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.
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