Asian Stocks Decline for Third Week on Europe, China Concerns

By Jonathan Burgos - Nov 19, 2011 5:47 AM GMT+0700

Asian stocks declined for a third- straight week, with the regional benchmark index within a percent of erasing October’s gains, amid concern about China’s property sector and evidence that Europe’s debt crisis is infecting major economies.

HSBC Holdings Plc (HSBA) and Commonwealth Bank of Australia led declines among lenders amid concern about contagion in Europe as Spain holds a general election this weekend. China Overseas Land & Investment Ltd. (688), the biggest mainland developer listed in Hong Kong, slid 6.9 percent after home prices in 33 Chinese cities dropped and the country’s banking regulator said loans to developers may sour. BHP Billiton Ltd. (BHP), the world’s biggest mining company, fell 4.4 percent as copper futures dropped for a third week.

“There will be pressure on European banks as the crisis drags on and that might have some global impact,” said Yoji Takeda, who manages about $1.1 billion at RBC Investment Management (Asia) Ltd. in Hong Kong. “China is trying to fine- tune its monetary policy to orchestrate a soft-landing, but at the same time they want to see lower property prices.”

The MSCI Asia Pacific Index dropped 2.7 percent to 114.20 this week, extending a three-week decline to 8.4 percent, as bond yields in Italy and Spain surged near the 7 percent threshold that led Greece, Ireland and Portugal to seek bailouts.

Hong Kong’s Hang Seng Index declined 3.4 percent this week, while China’s Shanghai Composite Index fell 2.6 percent. Japan’s Nikkei 225 (NKY) Stock Average fell 1.6 percent. Australia’s S&P/ASX 200 dropped 2.8 percent.

India’s Sensitive Index slumped 2.1 percent, the most among the Asia-Pacific indexes, as the rupee dropped against the dollar for a third week as Europe’s worsening debt crisis prompted investors to favor safer assets such as the dollar.

U.S. Debt

Stocks declined this week as Fitch Ratings said the creditworthiness of U.S. banks will deteriorate if Europe’s debt crisis spreads beyond the Europe’s five most-troubled nations. In the U.S., Republicans and Democrats on a congressional committee are struggling to find a compromise before a Nov. 23 deadline to produce a U.S. deficit-cutting plan.

HSBC, Europe’s largest bank, fell 4 percent to HK$59.25 in Hong Kong. Commonwealth Bank, Australia’s No. 1 lender, retreated 3.8 percent to A$47.73 in Sydney and was the biggest drag on a measure of financial companies in the Asia-Pacific index. Standard Chartered Plc (STAN), a London-based bank that makes most of its revenue in emerging markets, declined 7.5 percent to HK$159.40.

Political Turmoil

The sovereign-debt crisis has stirred political turmoil across Europe, with Italy and Greece replacing their leaders this month. Spain may speed up the timetable for forming a new government after the election on Nov. 20 so the first Cabinet meeting can be held on Dec. 23, ABC reported, citing officials in the People’s Party it didn’t name.

Exporters to Europe also dropped after the Bank of England said on Nov. 16 Britain’s economy faces a “markedly weaker” outlook and Spain cut its economic forecast.

Esprit Holdings Ltd., the clothier that counts Europe as its biggest market, tumbled 8.5 percent to HK$9.10 in Hong Kong. Canon Inc. (7751), the camera maker that gets about 32 percent of sales from Europe, dropped 2.5 percent to 3,350 yen in Tokyo. Mazda Motor Corp. (7261), the Japanese carmaker most dependent on Europe, declined 2.8 percent to 137 yen.

‘High Risk’

Chinese property developers and lenders fell as a government report showed home prices fell in 33 of 70 cities monitored by the government in October. The China Banking Regulatory Commission told lenders last week to step up debt restructuring for struggling local government financing vehicles and cut “high-risk” loans to developers, a person with knowledge of the matter said.

China Overseas Land sank 6.9 percent to HK$12.38. China Resources Land Ltd. (1109), a state-owned developer, slumped 5.3 percent to HK$10.70. Industrial & Commercial Bank of China (1398) Ltd., the nation’s biggest lender, dropped 8.3 percent to HK$4.44.

Gauges of raw material and energy producers led declines among the 10 industry groups in the MSCI Asia Pacific as copper futures decreased for a second week and a six-week rally in crude oil fizzled out.

BHP Billiton fell 4.4 percent to A$36.13 in Sydney. Rio Tinto Group, the world’s second-biggest mining company by sales, slid 3.4 percent to A$67.05. Cnooc Ltd. (883), China’s largest offshore oil producer, dropped 3.8 percent to HK$14.82 in Hong Kong.

Olympus Rebounds

Among stocks that advanced, Olympus Corp. (7733) jumped 36 percent to 625 yen in Tokyo on speculation the optical-equipment maker that admitted to hiding losses tied to acquisitions for decades may avoid delisting. The gain pared to 75 percent its decline in the five weeks after its ousted President Michael C. Woodford called for an investigation into the company’s past acquisitions.

“Not many people will dare to buy the shares with the risk of delisting, but some investors in short positions were buying back the shares,” said Kiyoshi Ishigane, a senior strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $84 billion. “Some people who believe the company won’t be delisted are buying the shares.”

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

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