Asian Stocks Fall on Earnings, Crude-Oil Prices; Dollar Rises

By Masaki Kondo and Patrick Rial

Oct. 21 (Bloomberg) -- Asian stocks fell for the first time in three days, led by technology and material shares, as China Mobile Ltd. and China Telecom Corp.’s profit disappointed some investors and oil prices dropped. The dollar rose.

China Mobile, the world’s biggest phone carrier by market value, and China Telecom, the nation’s biggest fixed-line phone carrier, lost at least 1.4 percent in Hong Kong. Cnooc Ltd., China’s largest offshore oil producer, fell 1.8 percent as the Wall Street Journal reported the company’s nine-month profit slumped. Samsung Electronics Co. retreated 2.3 percent in Seoul after AT&T Inc. sued the company and other liquid-crystal- display makers for collusion to fix prices.

The MSCI Asia Pacific Index lost 0.3 percent to 120.84 as of 3:43 p.m. Tokyo time. The gauge has surged 71 percent from a five-year low on March 9 amid signs the global economy is rebounding from the worst slowdown since World War II. The index sank by a record 43 percent in 2008.

“Investors haven’t forgotten the nightmare we had last year and are quick to sell when they get anxious,” said Kiyoshi Ishigane, a strategist at Mitsubishi UFJ Asset Management Co., which oversees about $56 billion in Tokyo. “Company profits are gradually returning, but we need to discern whether the stock price already reflects the improvement or not.”

Japan’s Nikkei 225 Stock Average was little changed, while the Hang Seng Index dropped 0.4 percent in Hong Kong. South Korea’s Kospi Index declined 0.3 percent as Samsung SDI Co., the world’s second-largest maker of lithium-ion rechargeable batteries, slumped 3.9 percent on brokerage downgrades.

Toshiba Recommendation

Among stocks that rose today, Toshiba Corp., the world’s No. 2 maker of flash-memory chips, gained 4 percent in Tokyo after CLSA Ltd. recommended the shares. Japan Airlines Corp., Asia’s biggest carrier, jumped 6.8 percent after the Nikkei newspaper said a government panel proposed more funding.

Futures on the Standard & Poor’s 500 Index dipped 0.1 percent. The gauge sank 0.6 percent yesterday after a Commerce Department report showed housing starts rose 0.5 percent in September, missing economists’ estimates.

The dollar strengthened amid lower demand for higher- yielding assets. The dollar traded at $1.4936 per euro from $1.4945 in New York yesterday, when it touched $1.4994, the weakest level since August 2008. The yield on 10-year Treasuries fell one basis point to 3.33 percent.

China Mobile fell 1.4 percent to HK$77.65 in Hong Kong. Third-quarter net income rose 2.6 percent to 28.6 billion yuan ($4.2 billion), compared with the 29 billion yuan anticipated by analysts in a Bloomberg News survey.

China Mobile Profit

“It will be very tough for people to get very excited about this set of results,” said Wendy Liu, who rates China Mobile shares “hold” at Royal Bank of Scotland Group Plc in Hong Kong. “Is a 2 percent increase that much different from a 2 percent decline? It will be tough for people to say they have turned around a corner.”

China Telecom fell 2.1 percent to HK$3.74 after its third- quarter net income tumbled 47 percent to 2.98 billion yuan, missing the 3.16 billion yuan expected by analysts.

Cnooc lost 1.8 percent to HK$12.24 as crude oil futures in New York declined 0.6 percent to $78.65 a barrel in after-hours trading. The company’s nine-month pretax profit fell 46 percent from a year earlier on lower oil prices, the Wall Street Journal reported. Oil futures are at about half the intraday record of $147.27 reached in July 2008.

Sumitomo Metal Mining Co., Japan’s largest nickel producer, dropped 1.6 percent to 1,561 yen. The London Metals Index, a measure of six metals including copper and nickel, fell 1 percent yesterday, retreating from a two-month high.

Liquid Crystal Display

Samsung, the world’s biggest maker of liquid-crystal displays, lost 2.3 percent to 735,000 won. LG Display Co. dropped 0.5 percent to 32,750 won, while Taiwan’s AU Optronics Corp. slid 2 percent to NT$32.05.

AT&T, the biggest U.S. phone carrier, filed a complaint in federal court, claiming the companies were among those that “formed an international cartel illegally to restrict competition” in the LCD market in the U.S.

“The material impact on the panel stocks may be limited, since the lawsuit can drag on for several years,” said Bevan Yeh, who helps manage about $1.2 billion at Prudential Financial Securities Investment Trust Enterprise in Taipei. “It’s inevitable that there will be some knee-jerk reaction.”

Better-than-estimated economic and earnings figures have driven the MSCI Asia Pacific Index’s seven-month rally. Stocks in the gauge are priced at 23 times estimated earnings, compared with an average of 18 times in the past three years.

Central Bank Action

This month, reports showed the U.S. service industries grew for the first time in a year and an export decline slowed in China. Amid signs the global economy is strengthening, Australia’s central bank unexpectedly raised its benchmark rate on Oct. 6 and has signaled further increases in coming months.

The U.S. housing report from yesterday helped drag down Nissan Motor Co., which counts North America as its biggest market, by 1 percent to 666 yen. Advantest Corp., the world’s biggest maker of memory-chip testers, sank 1.6 percent to 2,405 yen. James Hardie Industries NV, the biggest seller of home siding in the U.S., lost 0.7 percent to A$7.52 in Sydney.

In Seoul, Samsung SDI fell 3.9 percent to 137,000 won. Daishin Securities Co. and Meritz Securities Co. downgraded the stock even after the company reported a 48 percent surge in third-quarter earnings.

Toshiba gained 4 percent to 546 yen in Tokyo. CLSA raised its investment rating on the stock to “buy” from “underperform,” citing rebounding demand for flash memory.

Japan Airlines jumped 6.8 percent to 126 yen, the sharpest gain in the Nikkei 225. A government panel recommended the airline receive 300 billion yen ($3.3 billion) in private and public funds, more than an earlier proposal for 150 billion yen, the Nikkei newspaper reported.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Patrick Rial in Tokyo at prial@bloomberg.net.