Asian Stocks Fall After Standard & Poor’s Cuts U.S. Banks’ Credit Ratings

By Kana Nishizawa and Norie Kuboyama - Nov 30, 2011 4:03 PM GMT+0700

Asian stocks (MXAP) fell after Standard & Poor’s reduced credit ratings for lenders including Bank of America Corp., Goldman Sachs Group Inc. and Citigroup Inc. as Europe’s debt crisis cuts the global earnings outlook.

Sumitomo Mitsui Financial Group Inc. Japan’s second-biggest bank by market value, fell 1 percent in Tokyo. Nanya Technology Corp. (2408), a Taiwanese memory-chip maker, slumped 6.7 percent after a report DRAM prices for the second half of November fell. Japanese power producers led gains among companies whose earnings are viewed as stable throughout the economic cycle.

The MSCI Asia Pacific Index fell 0.5 percent to 112.63 as of 5:51 p.m. in Tokyo, headed for a 7.5 percent drop for the month. All but three of 10 industry groups on the measure declined, with about five stocks falling for every four that advanced.

“The rating cuts may have a negative impact on investor sentiment,” said Koji Toda, chief fund manager at Resona Bank Ltd. in Tokyo. “What investors are really paying attention to is whether policy makers are going to take steps to resolve the European debt situation.”

Japan’s Nikkei 225 Stock Average (NKY) fell 0.5 percent even after industrial production increased more than analysts expected in October.

Australia’s S&P/ASX 200 index rose 0.4 percent. South Korea’s Kospi Index slid 0.5 percent.

Hong Kong’s Hang Seng Index fell 1.5 percent, falling 9.4 percent for the month and set to become the third-worst monthly performer in Asia after benchmark indexes Vietnam and India.

China Monetary Policy

Declines in the region accelerated after Xia Bin, China’s central bank adviser and researcher at the State Council’s Development Research Center, said restructuring of its economy will depend on fiscal policy rather than on a loosening of monetary policies. Inflation is still on a “mild upward” trend due to rising labor costs and resource prices, he said.

The MSCI Asia Pacific Index declined 18 percent this year through yesterday, compared with a 5 percent drop by the S&P 500 and a 16 percent slump by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.6 times estimated earnings on average, compared with 12.1 times for the S&P 500 and 10.1 times for the Stoxx 600.

Measures of consumer staples and utilities were among the biggest gains of the MSCI Asia Pacific Index’s 10 industry groups. Japanese power producers Hokuriku Electric Power Co. (9505) increased 3.6 percent to 1,368 yen, Chugoku Electric Power Co. rose 3.1 percent to 1,309 yen and Kansai Electric Power Co. advanced 2.1 percent to 1,144 yen in Tokyo.

‘Defensive Tilt’

“People who are selling off cyclicals are also positioning themselves in stocks with a defensive tilt, such as utilities and consumer staples,” as global demand is likely to come off with governments around the world running on tight budgets, said Angus Gluskie, who manages about $300 million at White Funds Management in Sydney. “It’s a mixed sentiment out there. People are somewhat polarized and uncertain with little consensus in the outlook.”

Sumitomo Mitsui dropped 1 percent to 2,089 yen in Tokyo, while HSBC Holdings Plc (5), a lender that gets about a fifth of its revenue from North America, retreated 2.1 percent to HK$57.45 in Hong Kong. ICICI Bank Ltd., India’s second-largest lender by assets, slid 3.2 percent to 710.35 rupees in Mumbai.

Bank of America, Goldman Sachs and Citigroup had long-term credit grades reduced to A- from A by Standard & Poor’s after the ratings firm revised criteria for dozens of the largest global lenders. China Construction Bank Corp. and Bank of China Ltd., the nation’s No. 2 and No. 3 lenders, were upgraded to A from A-, joining Industrial & Commercial Bank of China Ltd., the world’s biggest bank by market value, on higher ratings than their U.S. rivals.

Memory Chips

Chipmakers fell after Digitimes said contract prices for dynamic random-access memory, the most common chip in computers, dropped almost 8 percent in second half of this month due to sluggish demand. The report cited industry sources in Taiwan.

Nanya Technology sank 6.7 percent to NT$2.36 while Powerchip Technology Corp. (5346), a maker of DRAM chips, declined 6.3 percent to NT$1.05 in Taipei. Elpida Memory Inc. (6665), a memory-chip maker, dropped 5.6 percent to 368 yen in Tokyo.

BlueScope Steel Ltd., Australia’s biggest steelmaker, fell 3.8 percent today and dropped 47 percent for the month, the steepest in the MSCI Asia Pacific Index, after saying last week it plans to sell new shares at a 34 percent discount to raise money for debt repayment.

To contact the reporters on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net; Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net.

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