Singapore/Tokyo: Asian stocks fell from a record, led by Japanese automakers, after Toyota Motor Corp. predicted its smallest profit increase since net income declined in 1999.
Toyota, which last month posted its first drop in U.S. sales in two years, slid to a five-month low. Consumer-goods companies including carmakers were the biggest drag on the Morgan Stanley Capital International Asia-Pacific Index, even as indexes extended highs in South Korea, China, Australia, New Zealand and Indonesia.
“It’s uncertain whether automakers will be able to make the same profits in North America as they have in the past and consequently expectations are being lowered,” said Toru Kitani, who manages $3 billion (Rs12,335 crore) in Japanese equities at Sompo Japan Asset Management Co. in Tokyo.
Rio Tinto Group dropped from a record after the company said yesterday it wasn’t aware of any takeover approach from bigger rival BHP Billiton Ltd. Posco jumped to a high as Morgan Stanley said it favored South Korean steelmakers over Chinese ones.
The MSCI index slid 0.4% to 149.51 at 7:01 pm in Tokyo, after earlier gaining as much as 0.2%. The measure yesterday climbed 0.7% to a record close.
In Japan, the Nikkei 225 Stock Average lost 0.1%, while the broader Topix index dropped 0.5%. Declines were limited as Mitsui Fudosan Co. forecast higher operating profit, lifting shares of the nation’s property developers.
Hyundai Heavy Industries Co. led South Korea’s shipbuilders higher after Citigroup Inc. raised its share-price target. China’s stocks rose to a fourth straight record on signs that more of the nation’s savings will flow into the market.
Benchmarks gained elsewhere, except in Hong Kong, India, Pakistan, Sri Lanka and the Philippines.
U.S. shares rallied yesterday on improved profit forecasts and continued takeover speculation, pushing the Standard & Poor’s 500 Index within 1% of its 2000 record. The Federal Reserve yesterday kept the benchmark interest rate unchanged at 5.25% and said inflation remains the “predominant” risk.
Toyota, the world’s largest automaker by market value, fell 1.8% to 7,070 yen, the lowest since 8 December after it said net income for the 12 months ending 31 March will rise 0.4% from a year earlier to 1.65 trillion yen. That will be its smallest profit increase since net income dropped in 1999 because of slowing U.S. growth and investments in new factories.
Japan’s motor vehicle sales slid 10% in April from a year earlier after plunging 13% in March, according to the Japan Auto Dealers Association in Tokyo.
Profit rose 20% last fiscal year to a record 1.64 trillion yen, Toyota said yesterday after the close of trading.
Nissan Motor Co., Japan’s third-largest automaker, declined 2.1% to 1,226 yen. Nissan’s U.S. sales fell 18% in April, the biggest drop among major companies. Honda Motor Co., the No. 2, slid 0.5% to 4,040 yen.
Rio Tinto, the world’s third-biggest mining company, retreated 3.8% to A$91.88. The stock yesterday surged 6.5% to a record on speculation bigger rival BHP will offer to buy the company.
Nick Cobban, a spokesman for London-based Rio, said the company hasn’t received an approach from BHP or other parties. Illtud Harri, a spokesman for BHP, declined to comment. BHP shares slid 0.4% to A$31.80.
“In the short term it’s not a huge possibility,” said Eric Betts, a Sydney-based strategist at Nomura Australia Ltd.
Posco, the world’s fourth-biggest steelmaker, rose 3.7% to a record 425,000 won. Dongkuk Steel Mill Co., South Korea’s third largest, advanced 0.7% to 29,250 won.
“We strongly prefer the risk-reward profile of Korean steel shares such as Posco and Hyundai Steel to that of Chinese steel shares,” wrote Jonathan Rhee, a Seoul-based analyst at Morgan Stanley, in a report today, citing “cost-cutting focus” and a “value-added product mix.”
Mitsui Fudosan, Japan’s largest developer by sales, jumped 2.4% to 3,830 yen. Tokyo Tatemono Co., which develops and manages condominiums and hotels, advanced 3 percent to 1,864 yen.
Operating income will reach 220 billion yen ($1.8 billion) for the year ending March 2010 as it shifts to property ownership from development, Mitsui Fudosan forecast after the market closed yesterday.
For the year ended March 2007, the developer’s operating profit from leasing business reached 81.4 billion yen, and from fee-based business totaled 48.5 billion yen, Mitsui Fudosan said.
“Sentiment is positive for property shares as rising land prices attract investors’ attention,” said Masaru Hamasaki, senior strategist at Toyota Asset Management Co. which oversees $3.3 billion in Tokyo.
Hyundai Heavy, the world’s biggest shipbuilder, rose 3.6% to a record 291,500 won. Samsung Heavy Industries Co., the second largest, climbed 1.5% to 35,050 won. Citigroup raised its price estimate for Hyundai Heavy by 91% to 450,000 won and for Samsung Heavy by 52% to 50,000 won.
“Citigroup’s target prices may look aggressive now, but it’s likely everyone else will eventually revise theirs to approach those levels,” said Kim Joo Hyoung, who manages about $650 million at KTB Asset Management Co. in Seoul. “Ship prices are rising and earnings showed improvement this quarter.”
The brokerage also raised its price targets for Daewoo Shipbuilding & Marine Engineering Co., the world’s third-largest maker of ships, by 33% to 56,000 won, and for Hyundai Mipo Dockyard Co., the fourth biggest, by 67% to 410,000 won, in today’s report.
Daewoo Shipbuilding added 3.6% to 40,500 won. Hyundai Mipo gained 5% to 239,500 won.
China’s CSI 300 Index gained 0.6% to a record. A total of $48.96 billion of equities were traded yesterday on the Shanghai and Shenzhen stock exchanges, about the same as the $48.98 billion total for the rest of the Asia-Pacific region, according to data compiled by Bloomberg.
China’s investors opened 385,121 new accounts at brokerages on 8 May, the highest daily tally since records were first published by the China Securities Depository and Clearing Corp. in June 2005. Negative real interest rates and property-tax increases announced over the past two years have helped steer more of the nation’s 17.2 trillion yuan ($2.2 trillion) of household savings into the market.
“Individual investors just keep pouring in fresh money,” said Chen Shide, who manages the equivalent of $212 million at GF Fund Management Co. in Guangzhou, southern China. “ The new investors are not aware of risks because they are too new to have experienced a bear market.”
Baoshan Iron & Steel Co., the listed arm of China’s biggest steelmaker, rose 6% to 12.70 yuan. Shanghai Pudong Development Bank Co., the Chinese partner of Citigroup, added 1.4% to 29.29 yuan.
— With reporting by Kevin Foley and Stuart Kelly in Sydney, Kyung Bok Cho in Seoul, Yidi Zhao in Beijing, Makiko Suzuki in Tokyo and Darren Boey in Hong Kong