By Lynn Thomasson and Yoshiaki Nohara - Nov 18, 2011 3:19 PM GMT+0700
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Japan’s Nikkei 225 Stock Average lost 1.3 percent, South Korea’s Kospi tumbled 2.1 percent and Hong Kong’s Hang Seng Index retreated 1.8 percent. Photographer: Tomohiro Ohsumi/Bloomberg
Nov. 18 (Bloomberg) -- Rajiv Jain, a senior portfolio manager at Vontobel Asset Management, talks about the outlook for Europe's debt crisis, global equity markets and his investment strategy. Jain speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Stocks fell, dragging the MSCI All Country World Index to a six-week low, while metals dropped and the South Korean won weakened as Europe’s debt crisis spread and concern mounted that bad loans in China increased.
MSCI’s global equity benchmark retreated 0.6 percent at 8:18 a.m. in London, heading for a third week of losses. The Stoxx Europe 600 Index decreased 0.4 percent. Standard & Poor’s 500 Index futures gained 0.2 percent after the U.S. gauge sank 1.7 percent yesterday. Copper lost 0.3 percent and nickel and zinc fell at least 0.7 percent. The won declined 0.8 percent as Asian currencies headed for the biggest weekly loss since September. Oil, which slid below $100 a barrel yesterday, climbed 0.2 percent to $99.
Investors drove up the funding costs of France and Spain as the countries sold 11.6 billion euros ($15.6 billion) of debt yesterday. The China Banking Regulatory Commission told lenders last week that loans to property developers are likely to sour as sales slow, a person with knowledge of the matter said. China’s home prices fell in 33 of 70 cities monitored by the government in October, the statistics bureau reported today.
“The main concern continues to be the European debt crisis and their inability to solve that problem,” said Michael Liang, chief investment officer at Foundation Asset Management (HK) Ltd. China’s property report “has caught the attention of investors that home prices are falling and China’s regulator is reminding people about banking risks,” he said.
The drop in property prices is the worst performance since the government expanded property curbs and scrapped the reporting of its national average housing data this year.
Nikkei, Kospi
S&P 500 futures climbed to 1,216.70. The U.S. stock gauge has slumped 3.8 percent in the past four days and closed yesterday at the lowest level in a month.
About five stocks fell for each that rose on the MSCI Asia Pacific Index. The regional benchmark has retreated 2.6 percent this week, bringing its loss for the year to 17 percent. Japan’s Nikkei 225 Stock Average declined 1.2 percent, South Korea’s Kospi tumbled 2 percent and Hong Kong’s Hang Seng Index sank 1.7 percent.
China Vanke Co., the nation’s biggest listed property developer, slumped 4.8 percent in Shenzhen, southern China. The regulator said banks should cut “high-risk” loans to developers, the person with knowledge of the instructions said. China Resources Land Ltd. fell 4.1 percent in Hong Kong.
Greek Bailout
“We see more problems in China,” Rajiv Jain, who oversees about $15 billion at New York-based Vontobel Asset Management Inc., told Susan Li on Bloomberg Television’s “First Up.” “We would not touch Chinese banks or Taiwanese banks or Korean banks or property stocks.”
Growth in Southeast Asian economies may have peaked last quarter as the European debt crisis and Thai floods hurt the outlook for exports. Malaysia’s gross domestic product increased 4.8 percent in the three months through September from a year earlier, after a 4 percent expansion the previous quarter, based on the median of 25 estimates from a Bloomberg News survey taken before a central bank’s report today.
Olympus Corp. (7733), the camera maker that admitted to hiding losses for decades, plunged 16 percent to end a four-day streak of gains. The company is under investigation by Japanese officials on suspicion of cooperating with organized crime to obscure billions of dollars of losses, the New York Times said.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, was poised for a third week of declines. South Korea’s won weakened to 1,139.13 per dollar today. Indonesia’s rupiah fell 0.8 percent to 9,075 per dollar.
European Turmoil
The euro gained 0.5 percent to $1.3520 after falling the past four days. German Chancellor Angela Merkel rejected yesterday French calls to deploy the European Central Bank as a crisis backstop, defying global leaders and investors calling for more urgent action to halt the turmoil. Merkel listed using the ECB as lender of last resort alongside joint euro-area bonds and a “snappy debt cut” as proposals that won’t work.
Copper dropped 0.3 percent to $7,519.25 a metric ton, having fallen as much as 2.1 percent today. The metal is set for a 1.6 percent decline this week, the third weekly drop. Zinc weakened 0.7 percent to $1,913 a ton and nickel lost 1.1 percent to $17,870.
Copper traders and analysts are the most bearish in almost two months because of mounting concern that Europe’s debt crisis will curb demand in the region that accounts for about 19 percent of global consumption. Eleven of 23 surveyed by Bloomberg expect the metal to decline, the second consecutive week that their outlook worsened and the highest proportion since Sept. 23.
The cost of protecting corporate and sovereign bonds from default in the Asia-Pacific region rose, according to traders of credit-default swaps. The Markit iTraxx Japan index increased 6 basis points to 192, Deutsche Bank AG prices show. That would be its highest close since Oct. 26, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.
To contact the reporters on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net
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