Asian Commodity Stocks Fall, Bonds Rise; China Shares Rally

By Patrick Rial and Akiko Ikeda

Nov. 13 (Bloomberg) -- Asian commodity stocks declined, led by BHP Billiton Ltd. and PetroChina Co., and bonds climbed on concern the pace of the global economic recovery will slow. China stocks rose on speculation the yuan will appreciate.

The MSCI Asia Pacific Index lost 0.1 percent to 117.69 as of 3:50 p.m. in Tokyo, paring a weekly advance to 1.1 percent. The yield on Japan’s 10-year government bond fell three basis points to 1.34 percent. Chinese yuan forwards climbed and shares rallied in Hong Kong and Shanghai as President Barack Obama arrived in Asia to push for more flexible exchange rates.

Crude oil traded near $77 after tumbling 3 percent in New York yesterday as U.S. stockpiles rose more than economists had forecast. China’s surging asset prices, a dollar collapse and a double-dip global recession are the biggest risks investors face in 2010, Michael Hartnett, Bank of America Corp.’s chief global equity strategist, wrote in a report issued yesterday.

“Lower commodity prices illustrate anxiety about the economy,” said Kiyoshi Ishigane, a strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees about $56 billion.

Ten-year U.S. Treasury notes rose, pushing the yield down two basis points to 3.43 percent, after Obama said the U.S. “desperately” needs jobs. The dollar fell 0.2 percent to $1.4877 per euro after gaining 0.9 percent yesterday as investors sold higher-yielding assets. South Korean three-year yields declined eight basis points to 4.26 percent.

Stimulus Withdrawal

Singapore’s Prime Minister Lee Hsien Loong warned at a gathering of the Asia-Pacific Economic Cooperation group that late withdrawal of monetary stimulus may stoke asset bubbles. Malaysia’s Prime Minister Najib Razak said policy makers must avoid prematurely ending fiscal programs until a “real” recovery is secured.

BHP, Australia’s largest oil producer, lost 1.4 percent to A$39.01 in Sydney. PetroChina, the nation’s biggest oil producer, fell 1.5 percent to HK$9.93.

Japan’s Nikkei 225 Stock Average dipped 0.4 percent to 9,770.31. Mitsui & Co., whose profit is the most sensitive among Japan’s five largest trading houses to changes in the price of oil, lost 1.1 percent to 1,184 yen.

“There are still skeptical investors out there who don’t think the global recovery will be sustained and this is tempering the advance in equities,” said Allan Yu, who helps manage $4.24 billion at Manila-based Metropolitan Bank & Trust Co. “The market is trying not to run ahead of itself.”

Oil, Gold Fall

Oil declined after an Energy Department report showed crude inventories rose a more-than-expected 1.76 million barrels last week and U.S. refinery operating rates fell to the lowest in more than a year. Analysts surveyed by Bloomberg News forecast a 1 million-barrel gain.

“There is a lot of uncertainty as to what we can expect with the rate of recovery in Western oil demand,” said Toby Hassall, a research analyst at CWA Global Markets Pty in Sydney. “There are sectors of the economy that remain weak.”

Crude oil for December delivery fell as much as 1.2 percent to $76 a barrel and was recently at $77.07. Futures, up 73 percent in 2009, have dropped 0.5 percent this week.

Gold futures for December delivery added 0.2 percent to $1,108 per ounce, after touching an all-time high of $1,123.40 yesterday. Newcrest Mining Ltd., Australia’s largest gold producer, slumped 2.8 percent to A$34.57.

The Dollar Index, which measures the greenback against a basket of six currencies, slipped 0.1 percent, ending a two-day, 0.9 percent advance. The U.S. currency dropped to the lowest since Aug. 8, 2008, during trading on Nov. 11, helping spur demand for gold as a store of value.

Yuan Appreciation?

Twelve-month non-deliverable forwards for the yuan rose 0.3 percent to 6.5895 per dollar in Shanghai, signaling traders are betting China will shift its currency peg of about 6.83 per dollar that’s been in place since July 2008. The Shanghai B- Share Stock Price Index, a gauge of dollar-denominated Chinese shares, jumped 9 percent on speculation corporate earnings in yuan will be bolstered by a stronger currency.

The Hang Seng Index climbed 0.6 percent to 22,520.05, led by China stocks. Industrial & Commercial Bank of China Ltd., the world’s most profitable bank, rose 1.4 percent to HK$6.76 after predicting loan profitability will improve.

APEC ministers yesterday called for “market-orientated exchange rates,” without naming the yuan. The People’s Bank of China this week said foreign-exchange policy will take into account global capital flows and changes in major currencies and scrapped language in a previous report to keep the yuan “basically stable.” The economy expanded by 8.9 percent in the third quarter from a year earlier.

“There has been a subtle message sent that as China’s economy starts to recover, it’s probably appropriate for the PBOC to move back to a managed float,” Stephen Roach, chairman of Morgan Stanley Asia in Hong Kong, said in an interview. A shift may not be imminent and wouldn’t reach the 15 percent to 20 percent that some U.S. lawmakers have demanded, he said.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Akiko Ikeda in Tokyo at iakiko@bloomberg.net.