Asia Stocks Fall for Second Day as Europe Crisis Deepens With German Sale

By Yoshiaki Nohara - Nov 24, 2011 8:22 AM GMT+0700

Asian stocks fell for a second day after Germany failed to receive sufficient bids at a debt sale, adding to concern Europe’s crisis is worsening and driving investors away from risky assets.

Sony Corp., Japan’s No. 1 exporter of consumer electronics that gets 21 percent of its sales in Europe, fell 1.2 percent. Komatsu Ltd. led declines among machinery makers after a U.S. report showed orders for durable goods fell last month. Mitsubishi Gas Chemical Co. slid 6.1 percent after Global Markets Japan Inc. cut the investment rating on the producer of chemical products to “neutral” from “buy.”.

The MSCI Asia Pacific Index dropped 0.4 percent to 109.91 as of 10:11 a.m. in Tokyo. More than two stocks fell for each that rose on the index, with all 10 industry groups dropping.

“The market has finally realized that Germany has a high level of public debt,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “Germany looks to be losing its safe-haven status, and it highlights the extent to which the European debt crisis has deteriorated. It can be only bad news for risky assets like equities.”

Futures on the Standard & Poor’s 500 Index (SPXL1) were little changed today. The index dropped 2.2 percent in New York yesterday after Germany failed to get bids for 35 percent of the 10-year bonds offered at a sale. The Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments rose to an all-time high yesterday, stoking concern the region’s debt crisis that began more than two years ago in Greece now risks engulfing Germany.

Thanksgiving Holiday

About $1 trillion has been erased from U.S. market value since Nov. 15 amid concern that Europe’s debt crisis will hamper the global economy. The U.S. market will close today for Thanksgiving and trading will end at 1 p.m. tomorrow.

Sony declined 1.2 percent to 1,290 yen. Kia Motors Co. (000270), South Korea’s second-largest carmaker by market value that generates 12 percent of its revenue in Europe, dropped 0.4 percent to 71,200 won.

Machinery makers fell after the Commerce Department reported yesterday that U.S. bookings for equipment meant to last at least three years declined 0.7 percent last month as demand for aircraft and business equipment cooled.

Komatsu dropped 3.8 percent to 1,823 yen. Kawasaki Heavy Industries Ltd. fell 2.6 percent to 188 yen.

The MSCI Asia Pacific Index declined 20 percent this year through yesterday, compared with a 7.6 percent drop by the S&P 500 and a 20 percent slump by the Stoxx Europe 600 Index. Stocks (MXAP) in the Asian benchmark are valued at 12.1 times estimated earnings on average, compared with 11.7 times for the S&P 500 and 9.6 times for the Stoxx 600.

Biggest Winner

Gree Inc., Japan’s social-networking service, has been the biggest winner on the Asian index this year, rising 146 percent. The worst performer has been Tokyo Electric Power Co., the owner of the crippled Fukushima Dai-Ichi nuclear power plant, losing 86 percent.

Mitsubishi Gas Chemical sank 6.1 percent to 431 yen today after Citigroup Global Markets Japan Inc. cut the investment rating on the company to “neutral” from “buy,” saying sluggish demand, increasing competition and the stronger yen are weighing on the earnings.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.