By Shani Raja and Jonathan Burgos
Sept. 28 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index to its biggest loss in two weeks, as the yen surged and disappointing U.S. data raised concerns about the strength of the economic recovery.
Honda Motor Co., which gets 47 percent of its sales in North America, sank 5 percent in Tokyo as the yen strengthened to an eight-month high versus the dollar and U.S. durable goods orders missed economist estimates. Mitsui O.S.K. Lines Ltd., Japan’s No. 2 shipping company, lost 5.4 percent after widening its loss forecast. Henderson Land Development Co. dropped 3 percent in Hong Kong after new mortgages in the city fell.
The MSCI Asia Pacific Index sank 1.6 percent to 115.93 as of 7:19 p.m. in Tokyo, the biggest drop since Sept. 14. The gauge has climbed 64 percent from a five-year low on March 9 as stimulus measures worldwide dragged economies out of recession. It has fallen 2.5 percent from a one-year high on Sept. 17.
“We are setting the stage for a mild correction in the next month,” Arjuna Mahendran, Singapore-based chief investment strategist for Asia at HSBC Private Bank, which oversees $494 billion in assets, told Bloomberg Television today. “Everybody is extremely undecided as to whether the next leg will be up or down. That leads us to question whether everything good that has happened in the past six months is really sustainable.”
Japan’s Nikkei 225 Stock Average slumped 2.5 percent to 10,009.52. Nomura Holdings Inc., which announced a record $5.7 billion share sale last week, sank 5.8 percent as Merrill Lynch & Co. recommended holding fewer shares of Japan’s brokerages.
China’s Shanghai Composite Index dropped 2.7 percent, while Hong Kong’s Hang Seng Index sank 2.1 percent. India is closed today for a public holiday.
Geely, Manila Electric
Geely Automobile Holdings Ltd. tumbled 11 percent in Hong Kong on concern China will curb auto stimulus measures. Astro Corp., a maker of game machine software, slumped 7 percent in Taipei after Penghu island residents voted against building casinos. Manila Electric Co. fell 3.7 percent after as much as 25 percent of its network was cut off by floods.
Futures on the Standard & Poor’s Index 500 rose 0.1 percent. The gauge retreated 0.6 percent after the Commerce Department reported orders for goods made to last several years dropped 2.4 percent in August. Economists had projected an increase. Sales of new homes rose 0.7 percent last month, less than economists had estimated, a separate report from the department showed.
“Recent data, particularly from the U.S., is pointing towards more moderate growth,” said Tim Schroeders, who helps manage about $1 billion at Pengana Capital Ltd. in Melbourne. “Share prices need positive earnings surprises and forecast upgrades to provide the impetus to move higher.”
Yen Strength
The MSCI Asia Pacific Index last week had its first weekly decline in three as commodity prices slumped and Tokyo-based Nomura Holdings Inc. announced a record $5.6 billion share sale. Companies on the gauge trade at 23 times estimated net income for this year, higher than 17.4 times for the S&P 500 Index.
Honda sank 5 percent to 2,675 yen. Toyota Motor Corp., the world’s largest automaker, slumped 3.8 percent to 3,570 yen. Panasonic Corp., the world’s largest maker of home electronics, lost 4 percent to 1,335 yen.
Japanese exporters also declined after the yen appreciated to as much as 88.24 per dollar, a level not seen since Jan. 23. A stronger yen reduces the value of overseas sales at Japanese companies when converted into their home currency.
Toyota Executive Vice President Yukitoshi Funo told reporters on Sept. 25 that the yen trading around 90 yen is “a bit painful.” Japan’s currency pared gains after Finance Minister Hirohisa Fujii said he was misinterpreted as supporting a stronger yen. The yen was recently at 89.43 per dollar.
Hong Kong Mortgages
Mitsui O.S.K. slumped 5.4 percent to 521. The company forecast an operating loss of 13 billion yen in the six months to Sept. 30, more than an earlier target of 5 billion yen, amid higher fuel and container-terminal costs.
In Hong Kong, Henderson lost 3 percent to HK$48.25 as lower lending approvals signaled a rally in the city’s property prices may falter. Cheung Kong (Holdings) Ltd., Hong Kong’s second- biggest developer by value, dropped 2 percent to HK$95.15.
New mortgages approved in the city dropped 8.2 percent in August from the previous month, the Hong Kong Monetary Authority said on Sept. 25.
“Investors are taking a wait and see approach,” said Michiya Tomita, who helps manage $61 billion at Mitsubishi UFJ Asset Management Co. in Hong Kong. “Purely looking at valuations, it’s easy to see why some are locking in gains from the rally.”
Rising Valuations
The rally since March had driven the average price of companies in the MSCI Asia Pacific Index to 1.6 times book value on Sept. 17, the highest in a year.
Nomura, Japan’s largest brokerage, tumbled 5.8 percent to 540 yen, adding to a 16 percent slide on Sept. 25. Takefuji Corp., a consumer lender, slumped 11 percent to 348 yen.
Merrill Lynch downgraded Japan’s brokerage and consumer- finance industries to “underweight” from “neutral,” citing a weakening stock market and possible tighter regulations.
Group of 20 leaders on Sept. 25 agreed on a plan to force banks to tie compensation more closely to risk and tighten capital requirements. The proposals came after a two-day meeting in Pittsburgh on measures to prevent a repeat of the financial crisis that caused more than $1.6 trillion of losses at the world’s biggest financial institutions.
In Hong Kong, Geely, whose parent is considering a bid for Volvo Car Corp., tumbled 11 percent to HK$2.05. China’s government has yet to say whether it will extend auto tax cuts and subsidies into 2010.
Stimulus Measures
“The stimulus measures certainly won’t be as strong as this year, assuming that the government keeps any of them in place,” said Yu Bing, an analyst at Pingan Securities Co. in Shanghai.
In Taipei, Astro lost 7 percent to NT$73.40 after the Penghu government said that 17,359 residents had voted against allowing casinos on the islands versus 13,397 who voted “yes.” Firich Enterprises Co., which makes point-of-sale systems, slid 6.9 percent to NT$78.10.
The vote may delay developers’ plans until at least 2012 since Taiwan’s law doesn’t allow repeating a similar referendum for three years.
Manila Electric, which serves the Philippine capital and surrounding areas, fell 3.7 percent to 181 pesos. The company said it has restored power to all but 4 percent of its circuits, or main lines.
As much as 25 percent of the company’s network was cut off because of flooding from the heaviest rains in four decades. The Philippine government said it’s struggling to cope with the flooding caused by Tropical Storm Ketsana.
To contact the reporter for this story: Shani Raja in Sydney at sraja4@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net.
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