Asian Stocks Fall on Isuzu, Elpida Losses; New World Declines

By Shani Raja and Jonathan Burgos

Aug. 5 (Bloomberg) -- Asian stocks fell, sending the MSCI Asia Pacific Index to its first back-to-back drop in a month, after Isuzu Motors Ltd. and Elpida Memory Inc. reported losses.

Isuzu, Japan’s largest maker of light-duty trucks, sank 4.7 percent and Elpida, the country’s biggest computer-memory chipmaker, slumped 5.1 percent. Industrial Bank Co. slid 3.8 percent in Shanghai, contributing to the first decline in Chinese stocks in five days amid valuation concerns. New World Development Co. declined 4.5 percent in Hong Kong as the city’s home sales fell last month.

The MSCI Asia Pacific Index fell 1.1 percent to 111.84 as of 4:14 p.m. in Tokyo, having swung between gains and losses at least seven times. Before today, the gauge had risen on all but two days since July 14 amid earnings reports that beat analyst estimates. The measure’s relative strength index rose to 75 yesterday, above the 70 level some traders use as a sell signal.

“Equities are pricing in a very strong recovery,” said Pearlyn Wong, a Singapore-based investment analyst at Bank Julius Baer & Co., which manages $350 billion. “Valuations are stretched. It’s hard to support a case for a continued rally.”

Japan’s Nikkei 225 Stock Average, which has gained 29 percent in the past six months, lost 1.2 percent. China’s Shanghai Composite Index fell 1.2 percent, while Hong Kong’s Hang Seng Index declined 1.3 percent.

David Jones Ltd., the country’s No. 2 department-store chain, dropped 8.4 percent after reporting a decline in same- store sales. Limiting declines in Australia, Axa Asia Pacific Holdings Ltd., a unit of France’s biggest insurer, climbed 2.3 percent as it returned to profitability. Westfield Group, the world’s biggest shopping center owner by value, rose 0.8 percent after UBS AG upgraded the stock.

U.S. Housing

Futures on the Standard & Poor’s 500 Index lost 0.4 percent. The gauge added 0.3 percent yesterday after the National Association of Realtors said the number of contracts to purchase previously owned homes rose 3.6 percent last month from June. Economists had estimated a 0.7 percent advance.

MSCI’s Asian gauge has rallied 58 percent from a more than five-year low on March 9 amid growing speculation the global economy is recovering. Reports this week from China, Europe and the U.S. pointed to improving manufacturing industries in the three regions, while U.K. consumer confidence rose to the highest level in more than a year last month as house prices stopped falling, Nationwide Building Society said.

Companies from Nissan Motor Co. to Samsung Electronics Co. have reported earnings in the past two weeks that exceeded analyst estimates, lifting the average valuation of companies in the MSCI Asia Pacific Index to 25 times estimated profit, the highest level since March 30.

Good Data

“There’s so much good data around that I’m losing track,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which manages about $95 billion. “Given the extent of the rally so far, I wouldn’t be surprised to see quite a significant pullback.”

Isuzu sank 4.7 percent to 163 yen as the company turned to a net loss of 16.6 billion yen in the quarter ended June 30, from a 17.7 billion yen profit a year earlier. Elpida slumped 5.1 percent to 1,115 yen after its first-quarter net loss widened on lower semiconductor prices.

Hallenstein Glasson Holdings Ltd., a New Zealand clothing retailer, dropped 1.1 percent in Wellington to NZ$2.82. Full- year profit fell 23 percent as the company cut prices to boost sales amid a recession.

Expensive Shares

Industrial Bank slid 3.8 percent to 39.91 yuan, as the Shanghai Composite Index snapped a four-day, 6.3 percent advance. Companies in the index trade at an average 37.2 times reported earnings, near an 18-month high and almost twice the level of the MSCI Emerging Market Index.

Jiangxi Copper Co., China’s largest producer of the metal, dropped 2.2 percent to 46.60 yuan. The company, whose shares have more than quadrupled this year, last week said first-half profit may decline by more than half.

“With shares so expensive, I doubt there will be much room for upside,” said Yan Ji, who helps oversee about $850 million at HSBC Jintrust Fund Management Co. in Shanghai.

In Hong Kong, New World, controlled by billionaire Cheng Yu-tung, lost 4.5 percent to HK$17.38. Sun Hung Kai Properties Ltd., the world’s biggest developer by value, dropped 4.7 percent to HK$113.80. Henderson Land Development Co. sank 3.4 percent to HK$51.35.

Hong Kong Aircraft Engineering Co., Swire Pacific Ltd.’s maintenance unit, tumbled 9.3 percent to HK$100.70 after reporting lower profit and predicting a “substantially weaker” second half.

Government Response

In Sydney, David Jones sank 8.4 percent to A$4.81 after same-store sales fell 1.2 percent, even as government stimulus payments spurred demand for clothing and fashion accessories.

Axa Asia climbed 2.3 percent to A$4.42 as it returned to profitability in the six months through June after asset writedowns abated. The company lost money in the six months ended Dec. 31 as the value of its investments slumped amid the global credit crisis.

“The last 18 months has seen the most remarkable and unprecedented combination of falls in investment markets, extreme volatility and impacts on the broader economy leading to extensive responses from governments, policy makers and industry,” Andrew Penn, chief executive officer of Melbourne- based Axa Asia, said in a statement today.

Thirty-five percent of the 342 companies in the MSCI Asia Pacific Index that have reported quarterly results so far have beaten analysts’ profit estimates, while 18 percent have missed, according to data compiled by Bloomberg.

Westfield rose 0.8 percent to A$12.05 after UBS AG upgraded its stock rating to “neutral” from “sell.” China Railway Group Ltd., the nation’s largest construction company by assets, climbed 7.5 percent to HK$7.59 after Goldman Sachs Group Inc. recommended investors buy the stock, citing an earnings recovery in the second half of the year.

To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net.