By Masaki Kondo and Jonathan Burgos
Dec. 10 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index to the lowest this month, amid concern gains in the yen will hurt Japan’s export earnings and as China moved to curb property speculation.
Mazda Motor Corp., which gets 25 percent of its revenue in North America, lost 3 percent in Tokyo as the yen traded near its highest level against the dollar in a week. China Vanke Co., the nation’s biggest listed developer, dropped 1 percent after the government extended the period of a sales tax on homes. Motech Industries Inc., Taiwan’s largest solar-cell maker, fell 6.9 percent after agreeing to sell a stake to Taiwan Semiconductor Manufacturing Co. at a discount.
The MSCI Asia Pacific Index lost 0.8 percent to 119.10 as of 6:18 p.m. in Tokyo, the lowest level since Nov. 30. The gauge is headed for its third weekly decline in four as downgrades of Spain’s debt outlook and Greece’s credit rating exacerbated credit-market concerns sparked by Dubai World’s plan to reschedule its debt payments.
“It is good for investors to take some money off the table given prevailing uncertainties,” said Daphne Roth, Singapore- based head of Asian equity research at ABN Amro Private Banking, which oversees about $14 billion. “Asian exports are still fragile and there are risks of credit defaults in Dubai and Greece.”
China’s Shanghai Composite Index added 0.5 percent, erasing an earlier 0.4 percent drop, as investors weighed the impact of policies announced by the State Council yesterday. Hisense Electric Co., which makes flat-panel televisions, climbed 5.7 percent in Shanghai after the government said it will continue appliance trade-in subsidies beyond May 2010, when it had been set to expire.
Credit Defaults?
Japan’s Nikkei 225 Stock Average dropped 1.4 percent. Hong Kong’s Hang Seng Index lost 0.2 percent. The S&P/ASX 200 Index sank 0.7 percent in Australia, even after a government report showed the country’s jobless rate dropped.
Futures on the Standard & Poor’s 500 Index added 0.3 percent. The gauge added 0.4 percent yesterday, as analyst upgrades of 3M Co. and Sprint Nextel Corp. helped offset concern that credit defaults will spread through the global economy. The index had declined earlier as Spain’s credit outlook was reduced to “negative” from “stable” at S&P.
The downgrade came after Fitch Ratings cut Greece’s credit rating on Dec. 8. The reliability of sovereign credit has come under scrutiny since Nov. 25, when Dubai World, a state-owned holding company, said it would seek a standstill agreement on its debt. The company has since said it’s in talks to renegotiate $26 billion of loans.
‘More Sensitive’
“Global uneasiness about credit is increasing,” said Mitsushige Akino, who oversees the equivalent of $450 million at Tokyo-based Ichiyoshi Investment Management Co. “People are becoming more sensitive to risks and they are reconsidering investments.”
Japanese automakers fell after the yen appreciated to as much as 87.37 per dollar yesterday, a level not seen since Dec. 3. A stronger yen reduces the value of overseas sales at Japanese companies when converted into their home currency. The yen was at 87.78 per dollar at the 3 p.m. close of stock trading in Tokyo.
Mazda, Japan’s fourth-largest automaker, slid 3 percent to 195 yen. Toyota Motor Corp., which gets 31 percent of its revenue in North America, lost 1.6 percent to 3,650 yen and was the heaviest drag on the MSCI Asia Pacific Index.
Suzuki Motor Corp. dropped 6.5 percent to 2,215 yen even after Volkswagen AG said it will buy a 19.9 percent stake in the Japanese automaker.
“Investors largely shrug off good news but respond quickly to bad news because they have little appetite for Japanese equities with the yen staying high,” said Toshio Sumitani, chief strategist at Tokai Tokyo Securities Co.
Chinese Automakers
Geely Automobile Holdings Ltd. tumbled 8.2 percent to HK$4.23 in Hong Kong. BYD Co., the maker of batteries and cars in which Warren Buffett has a stake, lost 1.5 percent to HK$68.75. They are among Chinese automakers that will suffer from a higher sales tax on smaller vehicles, CLSA Asia-Pacific Markets said today.
China will charge a 7.5 percent sales tax on vehicles with engines of 1.6 liters or less through the end of 2010, according to a statement posted on the State Council’s Web site yesterday. The government had halved the tax to 5 percent this year. The lower 5 percent tax is due to expire at the end of 2009.
While extending favorable policies for consumption, China’s government will impose a sales tax on homes sold within five years of their purchase, increasing the time period covered by the charge from two years, according to the State Council.
Extending Subsidies
China Vanke retreated 1 percent to 11.91 yuan, and Shanghai Industrial Development Co. lost 1.3 percent to 16.40 yuan. Gemdale Corp. fell 1 percent to 15.65 yuan.
Hisense jumped 5.7 percent to 24.34 yuan. Hefei Rongshida Sanyo Electric Co., which makes washing machines, added 5.5 percent to 24.87 yuan. The government will extend subsidies for purchases of appliances, automobiles and farming equipment in rural areas, the State Council said.
In Taipei, Motech tumbled 6.9 percent to NT$135.50. The company agreed to sell a 20 percent stake to Taiwan Semiconductor at a 16.9 percent discount. Taiwan Semiconductor dropped 1.8 percent to NT$61.30.
The MSCI Asia Pacific Index has risen 33 percent this year, set for the biggest annual increase since 2003, as government spending and lower interest rates revived economies globally. The index’s 2009 rally has outpaced gains of 21 percent by the S&P 500 and 22 percent by Europe’s Dow Jones Stoxx 600 Index on optimism growing demand in China will drive growth in Asia.
Companies in the MSCI gauge trade at an average 22 times estimated net income for this year, compared with 17 times for the S&P and 15 times for the Stoxx 600.
“Shares are no longer cheap and people are wondering how long the momentum in the stock market will last,” said Yoji Takeda, who manages the equivalent of $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. “I’m currently seeking companies whose valuations aren’t very high but fundamentals are solid.”
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net.
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