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Asian stocks drop, led by Japan’s Seven & I; Chinese banks fall

Asian stocks drop, led by Japan’s Seven & I; Chinese banks fall
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First Published: Fri, Apr 06 2007. 03 52 PM IST
Updated: Fri, Apr 06 2007. 03 52 PM IST
Tokyo/Hong Kong: Japanese retailers paced declines in Asian stocks after the Nikkei newspaper said that Seven & I Holdings Co.’s profit may miss the company’s forecast.
“The report on Seven & I prompted some disappointment among investors,” said Haruo Otsuka, who oversees $870 million (Rs3,714 crore) at Toyota Asset Management Co. in Tokyo. “Retailers are not doing all that badly but not well enough to attract money from other industry groups.”
Aeon Co. dropped for a second day after it forecast earnings that failed to meet investors’ expectations. Industrial & Commercial Bank of China Ltd led the country’s lenders lower after they were ordered to set aside more money as reserves.
The Morgan Stanley Capital International Asia-Pacific Index lost 0.2 percent to 146.17 at 7:00 pm in Tokyo, set for a 1.1% gain this week. Japan’s Topix Index dropped 0.2%. China’s CSI 300 Index rose, climbing to a record for a fifth day.
Measures in South Korea, Malaysia and Pakistan rose. Other markets in Asia and a number in Europe and North America are closed today for the Good Friday holiday.
Hyundai Motor Co. slid after South Korea’s top-ranked analyst said the company’s slow Chinese sales may reflect a weak brand image.
Seven & I, Japan’s largest retailer by sales, dropped 2.4% to 3,600 yen. Aeon, the country’s biggest supermarket operator, slid 3.7% to 2,225 yen. Yamada Denki Co., an operator of consumer electronics stores, declined 2.8% to 10,930 yen.
Missed Estimates
Seven & I, which operates supermarkets and convenience stores, may report about 287 billion yen ($2.4 billion) of group operating profit for the year that ended 28 February, the Nikkei said. That would be 6% less than the Tokyo-based company’s most recent forecast.
Aeon said on 4 April its operating profit, or sales minus the cost of goods sold and administrative expenses, for the current business year may increase to as much as 210 billion yen. That was lower than an average estimate of 210.5 billion yen by analysts surveyed by Bloomberg News.
“Japan’s retail industry is going through a round of major consolidation with winners and losers,” said Hiroyoshi Nakagawa, who helps manage about $1 billion in Asian equities at Societe Generale Asset Management Co. in Tokyo. “Buying the wrong stock could result in some big capital losses, so investors have to pay close attention to the earnings trends among companies.”
Kanamori Junichi, a Tokyo-based analyst at Mitsubishi UFJ Securities Co., cut his rating on the stock to “sell” from “buy” yesterday saying the current stock valuation is not cheap given a risk of a possible drop in earnings for the year ending March 2008. The stock was valued 31 times earnings on 4 April.
Chinese Banks
ICBC, China’s biggest listed lender, lost 1.8% to 5.45 yuan. Bank of China Ltd, the country’s second-biggest, slid 1.1% to 5.63 yuan. China Merchants Bank Co., the third- biggest, dropped 1.8% to 17.24 yuan.
The reserve requirement ratio, the amount banks must hold rather than lend, will rise by 0.5 percentage point to 10.5% from 16 April, the People’s Bank of China, the central bank, said yesterday. The increase, the sixth in less than a year, will remove 170 billion yuan ($22 billion) from the financial system for lending.
Central bank Governor Zhou Xiaochuan wants to cut excess investment as he tries to cool an economy that grew 10.7% last year, compared with a government target of 8%. Zhou last month raised interest rates to an eight-year high to reduce the risk of loans fueling inflation and asset bubbles.
‘Buying Spree’
The CSI 300 Index, previously known as the Shanghai and Shenzhen 300 Index, rose 0.9%, closing at a record for a fifth day. The measure has gained 6.7% in the past five days, the third consecutive weekly advance.
Hong Yuan Securities Co., the country’s first publicly traded brokerage, jumped 6.3% to 26.90 yuan. The company rose on speculation recent gains in China will spur trading and boost brokerage revenue.
The daily trading value for Shanghai’s yuan-denominated A shares averaged 88.1 billion yuan this year, compared with 23.7 billion yuan in 2006, according to data compiled by Bloomberg. Citic Securities on 15 March said profit rose almost sixfold last year.
“Brokerages’ first-quarter earnings are likely to be surprisingly strong,” said Zhang Ling, who manages the equivalent of $1.09 billion at ICBC Credit Suisse Asset Management Co. in Beijing. “That has prompted a buying spree.”
Vulnerable
Hyundai Motor, which sells four out of five cars it makes overseas, slipped 0.9% to 65,900 won. Kia Motors Corp., an affiliate of Hyundai Motor, lost 0.4% to 12,950 won.
Hyundai sold 20,008 vehicles in China last month, 20% fewer from a year earlier after competitors cut prices. Kia Motors’ Chinese sales declined 14% to 10,318 units, according to the companies.
“The Hyundai Motor Group has sacrificed its brand image in exchange for aggressive expansion” by selling too many cars as taxis, making them vulnerable in price competition, wrote Kim Hag Ju, an analyst at Samsung Securities Co., in a note today. Kim was ranked No. 1 among all South Korean analysts in Asiamoney’s 2006 poll of investors.
Astro All Asia Networks Plc, Malaysia’s first pay-television operator, rose 1.7% to 4.90 ringgit.
The company said after the market closed yesterday that it will join India’s Maran media group to provide digital satellite pay television services in India. Astro will spend $166 million buy a 20% stake in Sun Direct TV Pte, which has an Indian government license to operate direct-to-home television services. Maran will hold the rest.
The deal will allow “for greater content to flow back to Astro’s domestic channels,” Kevin Low, an analyst at HLG Securities Bhd, wrote in a report today. He kept his “buy” call on the stock with a target price of 5.80 ringgit.
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First Published: Fri, Apr 06 2007. 03 52 PM IST
More Topics: Money Matters | Equities |