By Adam Haigh and Jonathan Burgos
Oct. 16 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index down by the most in two weeks, as LG Display Co.’s profit missed analysts’ estimates and earnings from Goldman Sachs Group Inc. and Citigroup Inc. disappointed some investors.
LG Display, the world’s second-largest maker of liquid- crystal displays, declined 4.2 percent in Seoul as it forecast product prices to decline. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank by market value, sank 3.1 percent, leading declines by financial shares. Australian retailer Harvey Norman Holdings Ltd. slumped 6.7 percent after sales growth lagged behind smaller rival JB Hi-Fi Ltd.
The MSCI Asia Pacific Index dropped 0.8 percent to 119.52 as of 6:03 p.m. in Tokyo. The decline, the most since Oct. 2, pared the measure’s gain this week to 0.7 percent. The gauge has climbed 70 percent from a five-year low on March 9 as stimulus measures revived the global economy and company profits topped analyst estimates.
“When things go up so much you need some sort of correction. That’s healthy for the market,” said Yoji Takeda, who manages $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. “Valuations are high but not outrageously high given the growth prospects.”
The Topix Index sank 0.4 percent in Tokyo, where Japan Airlines Corp. slumped 11 percent after Kyodo News said the carrier may drop a plan to sell a stake in JALways Co. China Eastern Airlines Corp. fell 5.3 percent in Hong Kong as the International Air Transport Association said a recovery in premium air travel is “fragile.”
Outpacing Gains
Thailand’s SET Index rallied 2.8 percent from its biggest two-day loss in a year after the finance minister said shares may rebound on reduced foreign selling and an economic recovery. Stocks had retreated as the nation’s king remained in hospital yesterday for a 26th day.
Futures on the Standard & Poor’s 500 Index rose 0.2 percent. Oil producers helped lift the gauge by 0.4 percent yesterday to the highest level since October 2008. Gains were limited as Goldman Sachs’ profit fell short of the previous quarter’s record and Citigroup added the smallest amount to loan-loss reserves in two years.
LG Display led LCD makers lower, sinking 4.2 percent to 31,850 won. The company reported lower-than-estimated third- quarter profit yesterday and said panel prices are expected to “decline gradually.”
Industry leader Samsung Electronics Co. lost 3.7 percent to 746,000 won, while AU Optronics Corp., Taiwan’s largest LCD producer, fell 2.4 percent to NT$32.40.
“The industry will slow down because of weaker demand in the first quarter and as competitors boost production,” John Soh, an analyst at Shinhan Investment Corp., wrote in a report today. He cut LG Display’s share-price target by 7.3 percent to 38,000 won.
Financial Companies
An index of financial shares on the MSCI Asia Pacific Index retreated 0.9 percent today after closing at a 13-month high yesterday following better-than-estimated profit from JPMorgan Chase & Co.
Mitsubishi UFJ dropped 3.1 percent to 470 yen. Sumitomo Mitsui Financial Group Inc., Japan’s second-largest bank by market value, fell 1.9 percent to 3,190 yen. Nomura Holdings Inc., Japan’s largest brokerage, sank 1.1 percent to 633 yen.
“Although we are seeing some nominally good results from the U.S. financials, they also have very bad debts on their books,” said Yuuki Sakurai, chief executive officer of Fukoku Capital Management Inc., which manages about 800 billion yen ($8.6 billion). “In Japan, we are going to see some very big equity issuances from the mega-banks.”
JPMorgan’s earnings, a slowing in China’s export decline and a rise in Australian consumer confidence pushed the MSCI Asia Pacific Index this week to levels not seen since before Lehman Brothers Holdings Inc. collapsed in September 2008.
Valuation Concerns
The seven-month rally has driven valuations of stocks in the gauge to 23 times estimated earnings, compared with an average of 18 times during the last three years. The Asian index advanced 35 percent in 2009 through yesterday, outpacing the S&P 500’s 21 percent gain and a 25 percent climb by Europe’s Dow Jones Stoxx 600 Index.
“Investors are at a threshold due to valuation concerns though they are becoming convinced that profit growth is sustainable,” said Daphne Roth, Singapore-based head of Asian equity research at ABN Amro Private Banking, which oversees about $14 billion.
Harvey Norman, Australia’s biggest furniture and electronics retailer, sank 6.7 percent to A$4.44 in Sydney. First-quarter sales at the company’s stores open at least a year grew 2.1 percent, less than the 8.4 percent pace JB Hi-Fi reported this week. JB Hi-Fi added 0.9 percent to A$20.69.
In Tokyo, Japan Airlines, seeking its fourth state bailout since 2001, slumped 11 percent to 101 yen. JAL may hold on to JALways if it is able to win support from financial institutions, Kyodo said. Taro Namba, a JAL spokesman, declined to comment.
Air Travel
JAL has plunged 40 percent in the past month after Prime Minister Yukio Hatoyama’s new government took office and rejected a turnaround plan drawn up by the carrier. The airline is now working with a state-appointed panel on a new restructuring program and seeking help from lenders.
Airlines also fell after the International Air Transport Association said in a statement yesterday that a recovery in premium air travel slowed in August and may have reversed last month as demand for business flights remains fragile.
China Eastern sank 5.3 percent to HK$2.32. Air China Ltd., the nation’s largest international carrier, fell 5.4 percent to HK$4.42.
Sony Corp., which got 24 percent of its sales in the U.S. last year, gained 1.9 percent to 2,650 yen. The company was raised to “buy” from “hold” at Citigroup, which said the stock is “undervalued” and that profitability of the company’s PlayStation game-console business is set to recover.
The shares also gained on speculation the falling yen will boost the value of sales generated by Japanese companies overseas when translated into their home currency. The yen depreciated to as low as 90.99 versus the dollar, a level not seen since Sept. 25. Against the euro, Japan’s currency weakened to the lowest since Aug. 24.
“Export and commodities stocks are going to be the focus of buying as the yen passed a major milestone against the dollar and the performance of U.S. stocks and commodities points to an improving external environment,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc.
To contact the reporters for this story: Adam Haigh in Hong Kong at ahaigh1@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net.
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