Sydney/Tokyo: Asian stocks fell, sending the MSCI Asia Pacific Index down the most in a month, as commodities sank and investors questioned the pace of the economic recovery.
PetroChina Co. Ltd, China’s biggest oil producer, sank 2.6% in Hong Kong and Rio Tinto Plc., the world’s third largest mining company, lost 3% in Sydney as oil and copper fell. Toyota Motor Corp., the No. 1 auto maker worldwide, declined 3.4% after the yen strengthened and a New York manufacturing report missed estimates.
Asia stocks extended a global slump that dragged the MSCI World Index down by the most in two months on Monday. “Some may have believed that the deterioration of the global economy had ended, but that’s not the case,” said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co. Ltd, which oversees about $52 billion (Rs2.49 trillion) in Tokyo. “Those who bought stocks on a perception the economy would improve are now selling on reality.”
Little cheer: An electronic stock board showing the Nikkei 225 Stock Average in Tokyo, Japan. The index fell 2.9% to 9,752.88 even as the central bank raised its assessment of the economy for a second month. Tomohiro Ohsumi / Bloomberg
MSCI’s Asia index retreated 1.6% to 101.97 in Tokyo, the biggest drop since 14 May. The gauge has surged 44% from a five-year low on 9 March amid speculation the global economy is recovering. The index trades at 23.4 times estimated earnings, compared with 14.5 for the Standard and Poor’s 500 Index in the US.
Japan’s Nikkei 225 Stock Average fell 2.9% to 9,752.88 even as the central bank raised its assessment of the economy for a second month. The Bank of Japan left its benchmark overnight lending rate unchanged at 0.1%. Hong Kong’s Hang Seng Index declined 1.8%.
The Kospi Index dropped 0.9% in Seoul as MSCI Inc., whose stock indexes are tracked by investors with about $3 trillion in assets, left South Korea unchanged as an emerging market. The country, home to Asia-Pacific’s sixth largest stock market, had been under review for an upgrade to developed status.
Konica Minolta Holdings Inc. slumped 6.6% in Tokyo after Credit Suisse Group AG downgraded the printer maker. Australia’s Nufarm Ltd, which supplies farm chemicals, sank 12% after cutting its profit target. Among stocks that rose on Tuesday, Macquarie Communications Infrastructure Group surged 26% after receiving an increased takeover bid.
Futures on the S&P 500 dropped 0.2%. The gauge slid 2.4% on Monday, the most since 13 May, as the Federal Reserve Bank of New York’s general economic index fell to -9.4 in June from -4.6 the previous month.
Economists in a Bloomberg survey had expected the gauge to stay unchanged. Readings below zero for the index signal manufacturing is shrinking.
The New York data were the latest in a string of figures that have made some investors more cautious about economic growth prospects. Japan’s government reported on 8 June that the country’s current account surplus narrowed in April as exports slumped. Overseas shipments declined 26.4% last month from a year earlier, China’s customs bureau said on 11 June.
Investors expected the global economy will recover at a fairly fast pace, but this view is changing to one that a recovery will remain moderate, said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities Co. Ltd.
Crude oil declined 2% on Monday, falling for a second session. The contract lost as much as 1% in electronic trading on Tuesday. September delivery copper on the Shanghai Futures Exchange slid as much as 2.2% to the lowest for a most-active contract since 1 June.
PetroChina slumped 2.6% to Hong Kong $8.76 (Rs54.75). CNOOC Ltd, China’s largest offshore oil producer, dropped 5.5% to HK$9.90. Rio Tinto slumped 3% to Australian $73.23 (Rs2,845.72). BHP Billiton Ltd, the world’s biggest mining company, fell 1.5% to A$36.46.
Materials and energy stocks are among the three best performing of the MSCI Asia Pacific Index’s 10 industries in the past month as investors bet demand for raw materials will pick up as the global economy recovers. The International Monetary Fund raised its growth forecast for the US economy on Monday.
“The green shoots of an economic turnaround continue to appear, but the question is whether markets have priced in a bumper harvest,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd in Melbourne. “People are now turning their attention to the appropriateness of stock prices.”
Japanese exporters declined as the New York manufacturing report damped optimism their biggest market is recovering and the yen climbed, cutting the value of sales from abroad.
The yen rose to as high as 132.74 against the euro, the strongest level since 28 May. The Japanese currency advanced 1.5% to 96.35 per dollar, the biggest gain since 29 May. Toyota, which gets 31% of its revenue from North America, sank 3.4% to 3,700 yen (Rs1,813). Sony Corp., the maker of the PlayStation 3, lost 3% to 2,550 yen.
The MSCI gauge climbed more than 10% for a second month in May, which hasn’t happened since the two months ended 1993. The rally since March has driven the average valuation of companies in the gauge to 1.5 times the book value of assets, the highest level since September, according to Bloomberg data.
KonicaMinolta Holdings Inc. fell 6.6% to 976 yen, paring its climb this year to 43%. Credit Suisse lowered its recommendation to underperform from neutral saying the shares may have overheated.
Nufarm tumbled 12% to A$10.63 after it cut its earnings forecast on lower than expected weed-killer sales.
Macquarie Communications, which invests in television and radio-transmission towers, surged 26% to A$2.93. Canada Pension Plan Investment Board raised its offer for the company by 20% after shareholders threatened to block the purchase.
Berjaya Sports Toto Bhd, Malaysia’s biggest number betting operator, rose 5.9% to 5.25 ringgit (Rs72.14) after fourth-quarter net income jumped 67% and the company announced a special dividend.