Most Asian Stocks Decline on Valuation Concerns; STX Advances

By Shani Raja

Sept. 21 (Bloomberg) -- Most Asian stocks fell, led by finance and mining companies, amid concern a six-month rally has made shares expensive relative to earnings prospects.

BHP Billiton Ltd., the world’s largest mining company, declined 1.2 percent after metal prices slumped in London and New York. Shanghai Pudong Development Bank Co. fell 4.8 percent after winning regulatory approval for a share sale. STX Pan Ocean Co., South Korea’s biggest bulk carrier, climbed 8.2 percent after saying it’s in talks with Vale SA on a contract to transport iron ore.

About five stocks declined for every three that rose on the MSCI Asia Pacific excluding Japan Index, which lost 0.2 percent to 390.77 as of 12:28 p.m. in Hong Kong. The measure swung between gains and losses at least seven times. The gauge that includes Japan has rallied 67 percent from a five-year low on March 9, driving the average price of stocks in the index to 1.6 times book value, the highest level since this year’s trough.

“The path of least resistance for the market right now is up, but it won’t be a straight line up,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which manages about $75 billion. “You eventually get to a point where the market superficially looks expensive. We’re at that point now.”

Markets in Japan, Singapore, Malaysia, Indonesia, the Philippines and India are shut for holidays. The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, dropped 1.5 percent on concern new share sales will draw funds away from existing equities.

Australia’s S&P/ASX 200 Index lost 0.4 percent. Harvey Norman Holdings Ltd., the country’s biggest electronics retailer, declined 2.3 percent after it was downgraded at Credit Suisse Group AG. Hong Kong’s Hang Seng Index added 0.2 percent.

Hynix Semiconductor

Metallurgical Corporation of China Ltd., the construction company that helped build Beijing’s Olympic stadium, rose 28 percent on its debut. Hynix Semiconductor Inc., the world’s second-largest maker of computer-memory chips, added 4.4 percent in Seoul after Morgan Stanley upgraded the stock.

Futures on the U.S. Standard & Poor’s 500 Index lost 0.2 percent. The gauge added 0.3 percent on Sept. 18, amid analyst upgrades of companies from Procter & Gamble Co. to SanDisk Corp. and Chevron Corp.

BHP lost 1.2 percent to A$38.23. A gauge of six metals on the London Metal Exchange sank 2.9 percent on Sept. 18, the most in a week, while copper futures in New York slumped 3.8 percent, the biggest drop since Aug. 31. Jiangxi Copper Co., China’s biggest producer of the metal, slumped 2.9 percent to 38.01 yuan.

Centennial Coal Co. lost 3.2 percent to A$3.35 in Sydney after the Australian Financial Review reported the company plans to raise A$200 million ($173 million) in a share sale.

Share Sales

Shanghai Pudong Bank sank 4.8 percent to 19.47 yuan after winning approval from the China Securities Regulatory Commission to sell 1.14 billion new shares in a private placement.

Metallurgical Corporation soared 28 percent to 6.91 yuan on its first trading day. The state-owned contractor that works for China’s largest steel mills raised 18.97 billion yuan ($2.8 billion) and has said it expects to benefit as the government encourages steelmakers to replace old mills.

China’s securities regulator at the weekend approved six more companies for listing on the nation’s Nasdaq-like board for start-ups in the second batch of initial public offerings in Shenzhen, bringing the total number to 13.

“The pace of new share sales looks a bit fast now,” said Chen Wenzhao, a strategist at China Merchants Securities Co. in Shanghai. “That will have a negative impact at a time when the market is very sensitive to liquidity.”

Credit Crisis

The MSCI Asia Pacific Index’s six-month rally has been driven by better-than-estimated economic reports and corporate earnings. Of 648 companies on the gauge that reported net income for the latest quarter, 225 beat analyst predictions, compared with 138 that missed.

The index has now recovered to levels last seen before the collapse of Lehman Brothers Holdings Inc. a year ago. The ensuing credit crisis caused more than $1.6 trillion in losses at financial institutions and helped drag economies globally into recession. Federal Reserve Chairman Ben S. Bernanke said last week the U.S. recession is “very likely” over.

The Bank of Japan upgraded its assessment of the economy on Sept. 17 though said it remained concerned about the strength of the recovery. South Korea’s economic growth in the third quarter may slow from the previous three months, Finance Minister Yoon Jeung Hyun said today.

‘Much Deeper Correction’

“A lot of good news is already reflected in the market,” said AMP’s Naeimi. “We have to come to terms with the reality that sooner or later we’ll get a much deeper correction than we’ve experienced so far.”

Brilliance China Automotive Holdings Ltd., a partner of Bayerische Motoren Werke AG, fell 5.4 percent to 88 Hong Kong cents after reporting a first-half loss.

In Seoul, STX Pan Ocean climbed 8.2 percent to 12,500 won. The company may haul about 300 million metric tons of iron ore for Vale, the world’s biggest producer of the commodity, over 25 years, spokesman Hwang Sung Min said by phone today.

Hynix surged 4.4 percent to 21,300 won in Seoul after it was raised to “equal-weight” from “underweight” at Morgan Stanley. Separately, the price of the benchmark computer-memory chip climbed 5.9 percent on Sept. 18, the most since April 22, according to Dramexchange Technology Inc.

Harvey Norman declined 2.3 percent to A$4.21 in Sydney after it was cut to “underperform” from “neutral” at Credit Suisse. APN News & Media Ltd. fell 1.6 percent to NZ$2.45 in Wellington after the publisher of more than 100 newspapers in Australia and New Zealand was downgraded to “underweight” from “neutral” at JPMorgan Chase & Co.

In Taipei, Dynapack International Technology Corp., a battery maker, surged 6.9 percent to NT$108.50 after the Commercial Times reported Delta Electronics Inc. may invest in the company.

To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.