Asian Stocks Decline Ahead of Greece Meeting to Decide Leadership Change

By Jonathan Burgos and Yoshiaki Nohara - Nov 7, 2011 9:21 AM GMT+0700

Asian stocks fell ahead of a meeting by Greek leaders today to decide who will head a new unity government that will help secure international financing after Prime Minister George Papandreou agreed to step down.

Westpac Banking Corp. (WBC), Australia’s second-biggest lender by market value, slipped 0.9 percent on speculation a default by Greece will threaten bank earnings. Cnooc Ltd. (883) dropped 2.6 percent after the Chinese oil explorer’s planned purchase of BP Plc’s stake in Argentine crude producer Pan American Energy LLC collapsed. Takeda Pharmaceutical Co. declined 2 percent after the Japanese drugmaker slashed its full-year profit outlook.

The MSCI Asia Pacific Index lost 0.4 percent to 119.76 as of 11:12 a.m. in Tokyo, with about three shares falling for every two that rose on the gauge. The measure sank 3.6 percent last week, the most since Sept. 23, after Greece announced plans to hold a referendum on Europe’s rescue package. Papandreou agreed to step down to allow the creation of a unity government that will help secure international aid to avert a default on its sovereign debt.

“There’s going to be some uncertainty of what the direction of the unity government is,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “It’s an opportunity to sit back and wait for clarity in terms of how governments and investors are going to approach the European situation.”

Japan’s Nikkei 225 (NKY) Stock Average fell 0.6 percent and South Korea’s Kospi Index slid 0.2 percent. Australia’s S&P/ASX 200 lost 0.3 percent. Hong Kong’s Hang Seng Index rose 0.5 percent, while China’s Shanghai Composite Index slipped 0.1 percent. Markets in India, Malaysia, Philippines and Singapore were closed for holidays.

No IMF Agreement

Futures on the Standard & Poor’s 500 Index lost 0.2 percent today, erasing gains of as much as 0.6 percent earlier. In New York, the index fell 0.6 percent on Nov. 4 as the Group of 20 nations’ failure to agree on increasing the International Monetary Fund’s resources to fight Europe’s debt crisis offset a drop in the U.S. unemployment rate.

The refusal of major economies to stump up money now reflected irritation with Europe’s failure to resolve its crisis and foiled investor hopes that the summit would mark a turning point. The turmoil instead flared again with Greek leaders agreeing to form a new government.

Papandreou met with Antonis Samaras, the leader of the main opposition party, and “agreed to form a new government with the aim of leading the country to elections immediately after the implementation of European Council decisions on Oct. 26,” according to an e-mailed statement from the office of President Karolos Papoulias in Athens. Papandreou has already said he won’t lead this new government, the statement said.

Meetings Today

Both sides will meet again today to decide who will be the head of the new government, with a separate meeting to discuss the timeframe and the new government’s mandate, the statement said. Papoulias also will host a meeting of all political party leaders today.

The MSCI Asia Pacific Index declined 13 percent this year through Nov. 4, compared with a 0.4 percent drop by the S&P 500 and a 13 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 13 times estimated earnings on average, compared with 12.6 times for the S&P 500 and 10.3 times for the Stoxx 600.

Of the 433 companies that reported results on the Asian benchmark index since October 11, 206 missed analysts’ estimates, while 151 exceeded expectations, according to data compiled by Bloomberg.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.

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