Asian Stocks Fall on Commodity Prices, Hong Kong Property Curbs

By Masaki Kondo and Shani Raja

Oct. 27 (Bloomberg) -- Asian stocks declined, dragging the MSCI Asia Pacific Index down by the most in three weeks, as raw- material prices fell yesterday and Hong Kong enacted measures to curtail property speculation.

Mitsubishi Corp., a Japanese trading company that gets 39 percent of its sales from commodities, slumped 5.5 percent. Sun Hung Kai Properties Ltd. sank 3.4 percent in Hong Kong after the city tightened down-payment requirements for luxury homes. Kawasaki Kisen Kaisha Ltd., Japan’s No. 3 shipping line, dived 6.4 percent after more than doubling its yearly loss forecast.

The MSCI Asia Pacific Index dropped 1.5 percent to 117.99 as of 5:17 p.m. in Tokyo, set for the biggest slump since Oct. 2. The gauge has climbed 67 percent from a five-year low on March 9 amid signs government measures were helping the global economy out of its worst slump since World War II.

“We’re at a turning point” said Diane Lin, a Sydney-based fund manager at Pengana Capital Ltd., which oversees about $1.1 billion. “The stimulus has been helpful in pulling economies out of recession, but markets have been taking it for granted that this will continue.”

Japan’s Nikkei 225 Stock Average declined 1.5 percent. Consumer lenders Aiful Corp. and Promise Co. lost more than 2 percent after an industry group said about 50 percent of customers may be rejected for additional loans.

India’s Sensex fell 1.3 percent, led by banks after the central bank ordered lenders to keep more cash in government bonds, signaling the start of a tighter monetary policy.

James Hardie, Baidu

Australia’s S&P/ASX 200 Index declined 1.6 percent. James Hardie Industries NV, the No. 1 seller of home siding in the U.S., fell 4.2 percent as U.S. senators discussed cutting a tax credit for homebuyers. The Kospi Index lost 0.5 percent in Seoul with LG Innotek Co. slumping 8.4 percent after Credit Suisse Group AG downgraded the stock.

Among shares that gained, Chuo Mitsui Trust Holdings Inc. surged 7.9 percent in Tokyo, while Sumitomo Trust & Banking Co. added 1.8 percent after the Nikkei newspaper said both banks will merge in “spring” 2011.

Baidu Inc., the operator of China’s biggest search engine, sank 13 percent in U.S. after-hours trading after forecasting fourth-quarter revenue that missed analysts’ estimates.

Futures on the Standard & Poor’s 500 Index were little changed. The U.S. gauge declined 1.2 percent yesterday, led by financial companies after Richard Bove, a Rochdale Securities LLC analyst, said the government will force Bank of America Corp. to raise more capital before repaying the Troubled Asset Relief Program.

Oil, Copper

U.S. stocks will “drop painfully from current levels,” in the coming year amid disappointing economic data and profits as margins shrink, Jeremy Grantham, chief investment strategist at Grantham Mayo Van Otterloo & Co., wrote in a quarterly report.

Mitsubishi, Japan’s biggest trading house, dropped 5.5 percent to 1,962 yen. Woodside Petroleum Ltd. retreated 2.5 percent to A$49.60 in Sydney. BHP Billiton Ltd., the world’s biggest mining company, fell 2.2 percent to A$38.85.

Crude oil for December delivery lost 2.3 percent to $78.68 a barrel in New York yesterday, the biggest drop since Sept. 24. Copper futures fell 0.8 percent, declining from the highest level in almost 13 months.

Sun Hung Kai Properties, Hong Kong’s No. 1 property developer by market value, fell 3.4 percent to HK$118.20. Cheung Kong (Holdings) Ltd., the second biggest, slid 3 percent to HK$102.30.

Down payments for homes priced above HK$20 million ($2.6 million) will be raised to 40 percent from 30 percent, Hong Kong Monetary Authority Chief Executive Norman Chan said.

Shipping Lines Fall

Kawasaki Kisen slumped 6.4 percent to 353 yen. Market leader Nippon Yusen K.K. fell 2.5 percent to 347 yen, while Mitsui O.S.K. Lines Ltd. lost 2.5 percent to 551 yen.

Kawasaki Kisen more than doubled its net-loss forecast for the year to March 2010. Nippon Yusen widened its full-year loss forecast by more than fivefold, while Mitsui O.S.K. cut its annual earnings target by 93 percent.

LG Innotek, a maker of mobile-phone components, dropped 8.4 percent to 115,000 won, the steepest decline in two months. Credit Suisse cut its recommendation to “underperform” from “neutral,” citing worse-than-expected earnings.

Stocks have rallied since March amid better-than-estimated economic and earnings figures. This month, reports showed an export decline slowed in China and U.S. service industries grew for the first time in a year. Amid signs the global economy is improving, Australia’s central bank unexpectedly raised its benchmark rate on Oct. 6 and has signaled further increases in coming months.

Valuation Concerns

After markets shut, Honda Motor Co., Japan’s No. 2 automaker, almost tripled its full-year earnings forecast as government stimulus measures spurred demand. Toshiba Corp., the nation’s biggest memory chipmaker, reported a narrower-than- forecast loss for the first half.

The MSCI Asia Pacific Index has risen 32 percent this year, set for the biggest annual gain since 2003. Stocks in the benchmark are valued at 23 times estimated earnings for this year, higher than 17 times for the S&P 500 and 15 times for Europe’s Dow Jones Stoxx 600 Index, according to Bloomberg data.

“There is doubt as to whether the current outlook for profit growth next year can justify current valuations,” said Hideo Arimura, a senior fund manager at Mizuho Asset Management Co., which oversees the equivalent of $35 billion in Tokyo.

Consumer Lenders

Japanese consumer lenders fell after the Japan Financial Services Association said yesterday that half of the companies’ borrowers may be rejected for additional loans as regulations providing a ceiling on lending are implemented.

Aiful declined 2.1 percent to 140 yen in Tokyo, while rival Promise slipped 4.7 percent to 587 yen. Acom Co. slid 7.5 percent to 1,186 yen, extending yesterday’s 4 percent drop, after the company said on Oct. 23 that first-half earnings were 85 percent lower than its forecast.

“There is so much uncertainty over consumer lenders,” said Mizuho Asset’s Arimura. “There are few institutional investors who touch these shares and I can’t come up with any reason their shares will rise.”

Heizo Takenaka, the architect of policy changes credited with securing Japan’s longest postwar economic expansion, said in an interview last week he is concerned the government doesn’t have any “overarching” economic policies. Takenaka served in cabinet posts including economy minister from 2001 to 2005.

James Hardie retreated 4.2 percent to A$7 in Sydney. Shares of U.S. homebuilders slumped yesterday as senate leaders negotiated to extend and gradually reduce the housing tax credit through 2010.

Chuo Mitsui surged 7.9 percent to 367 yen, and Sumitomo Trust added 1.8 percent to 500 yen. The banks will merge in spring 2011, which will create Japan’s fifth-largest bank, the Nikkei newspaper reported today, without citing anyone. The banks said in a separate statement that nothing has been decided, without confirming or denying the report.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.