Asian Stocks Fall on JPMorgan Retail Banking Loss, Valuations

By Anna Kitanaka and Kana Nishizawa

Jan. 18 (Bloomberg) -- Asian stocks fell, snapping four weeks of gains for the MSCI Asia Pacific Index, after JPMorgan Chase & Co. reported a loss in retail banking and U.S. consumer confidence trailed forecasts.

Nissan Motor Co., which gets about 35 percent of its sales from North America, slumped 2.6 percent. Lender HSBC Holdings Plc, which generates a fifth of its revenue in North America, fell 1.6 percent in Hong Kong. China Mobile Ltd. declined 2.5 percent in Hong Kong, leading declines by telecommunications stocks on concern recent gains had overvalued earnings prospects.

“There’s a bit of nervousness around U.S. reporting season at the moment,” said Tim Schroeders, who helps manage $1.1 billion at Pengana Capital Ltd. in Melbourne. “The rapid appreciation of share prices over the past 12 months means investors are right to question the rate of growth and the rate of future growth.”

The MSCI Asia Pacific Index dropped 0.5 percent to 126.16 at 7:04 p.m. in Tokyo. The gauge has climbed 48 percent in the past year as central banks cut borrowing costs and governments boosted spending to drag their economies out of recession. Shares on the index are priced at an average 1.65 times book value, the highest level since September 2008.

The Nikkei 225 Stock Average slumped 1.2 percent in Japan, where the central bank said it will persist with an easy monetary policy to sustain an economic recovery. Hong Kong’s Hang Seng Index lost 0.9 percent.

Consumer Sentiment

Australia’s S&P/ASX 200 Index added 0.2 percent, led by IOOF Holdings Ltd., which surged 7.1 percent amid takeover speculation. Sims Metal Management Ltd., the world’s biggest recycler of scrap metal, slumped 4.5 percent in Sydney after it was downgraded by JPMorgan.

Futures on the S&P 500 added 0.2 percent. The gauge slid 1.1 percent on Jan. 15 after JPMorgan reported its fourth- quarter results and as the Reuters/University of Michigan preliminary index of consumer sentiment for January missed the median economist estimate.

Nissan dropped 2.6 percent to 780 yen, while Honda Motor Co., Japan’s second-largest automaker which receives 42 percent of its sales from North America, fell 0.9 percent to 3,370 yen.

“Wages and the job market have yet to recover,” said Mitsushige Akino, who oversees about $450 million in assets in Tokyo at Ichiyoshi Investment Management Co. “With weak consumer spending, a full-scale recovery in the U.S. economy won’t happen soon. Instead, workers will face tougher situations as companies continue restructuring.”

JPMorgan Earnings

HSBC fell 1.6 percent to HK$89.25. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank by market value, lost 1.6 percent to 498 yen in Tokyo.

JPMorgan, the largest U.S. bank by market value, reported fourth-quarter net income that beat analyst estimates, though said it was “cautious” about the outlook for consumer loan defaults. Its retail unit posted the first quarterly loss since the first three months of 2008.

JPMorgan is the first of the largest U.S. banks to report earnings. Goldman Sachs Group Inc. may say Jan. 21 that quarterly profit climbed to $3.36 billion after a loss of $2.29 billion in the same period a year earlier, according to analyst estimates compiled by Bloomberg.

“The concern is about the rate of growth,” said Pengana’s Schroeders. “Growth is coming through from all the major banks but the rate of improvement that some investors are expecting may not be as strong as previously estimated.”

Takeover Talks

Aozora Bank Ltd., the Japanese lender controlled by Cerberus Capital Management LP, fell 5.5 percent to 121 yen. Chief Executive Officer Brian Prince said “areas of disagreement” have arisen in merger talks with Shinsei Bank Ltd. Shinsei Bank slumped 4.7 percent to 123 yen.

In Sydney, Australia & New Zealand Banking Group Ltd., Australia’s fourth-biggest lender, climbed 3.3 percent to A$23.17. The bank is in preliminary takeover talks with fund manager IOOF, the Age newspaper reported. IOOF surged 7.1 percent to A$6.45. Spokespeople at both companies declined to comment on the story.

A gauge of materials producers on the MSCI Asia Pacific Index, the best performing of 10 industry groups in the past 12 months, was the third-biggest drag on the broader gauge today. Copper futures in New York sank 0.6 percent on Jan. 15, crude- oil futures dropped 1.8 percent and gold declined 1.1 percent.

BHP Billiton Ltd., the world’s biggest mining company, sank 0.5 percent to A$43.44. Cnooc Ltd., China’s largest offshore oil producer, dropped 2 percent to HK$12.04. Mitsubishi Corp., a trading company that gets 39 percent of its sales from commodities, slid 2.8 percent to 2,453 yen as Goldman Sachs cut its rating to “neutral” from “buy.”

China Mobile, KDDI

Sims Metal Management slumped 4.5 percent to A$23.99. The stock was downgraded to “neutral” from “overweight” at JPMorgan. The 12-month target share price is A$23.00 per share.

China Mobile, the world’s biggest phone carrier, fell 2.5 percent to HK$76.90 in Hong Kong after its 14-day relative strength index ended last week at 74. Some traders and investors use a reading above 70 as a signal that prices have risen too rapidly and may fall.

KDDI Corp., Japan’s second-largest mobile-phone operator, fell 2.2 percent to 537,000 yen in Tokyo. The carrier’s 14-day relative strength index closed today at 71.6.

“The market is overheating and investors have been looking for excuses to sell and take profit,” said Ichiyoshi Investment’s Akino.

Rising Confidence

The MSCI Asia Pacific Index rose 7.9 percent in the four weeks through Jan. 15 as economic figures fueled confidence in the global recovery. Stocks in the MSCI Asia Pacific Index are valued at 20 times estimated net income, compared with 15 times for the U.S. S&P 500 and 13 times for Europe’s Dow Jones Stoxx 600 Index.

China’s vehicle sales rose 46 percent to 13.6 million last year, the China Association of Automobile Manufacturers said on Jan. 11. The nation’s exports also surged 17.7 percent in December and imports rose to a record, the customs bureau said on Jan. 10.

The Bank of Japan today raised its economic assessment in four of the country’s nine regions as the nation recovers from its worst postwar recession. All nine areas reported increases in industrial production as well as higher sales of cars and home appliances.

Doosan Heavy Industries & Construction Co., South Korea’s biggest power-equipment maker, jumped 7.9 percent to 93,400 won, the biggest gain on the MSCI Asia Pacific Index. The stock was raised to “buy” from “hold” at Korea Investment & Securities Co. The Hurriyet newspaper also reported Jan. 15 that Turkey may pick South Korea to build a nuclear power plant.

MTR, Fletcher Building

MTR Corp., the operator of public transport services in Hong Kong, rose 2.1 percent to HK$27.25, the biggest advance on the Hang Seng Index. Hong Kong lawmakers approved funding for a train line linking the city with China’s high-speed rail network on Jan. 16. MTR Corp. will construct the link at a cost of HK$2.57 billion ($331 million) per kilometer.

New Zealand’s NZX 50 Index declined 0.3 percent in Wellington. Fletcher Building Ltd., the biggest maker of fiberglass insulation in New Zealand and Australia, declined 2.4 percent to NZ$8.11.

New Zealand’s house prices fell for the first time in six months in December as the number of properties sold declined for a third month, according to data from the Auckland-based Real Estate Institute of New Zealand Inc.

To contact the reporter for this story: Anna Kitanaka in Tokyo akitanaka@bloomberg.net; Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net.