Tokyo: Asian stocks dropped, dragging the regional benchmark index to a five-week low, after Japanese machinery orders and US retail sales fell at double the pace economists had estimated.
Advantest Corp., the world’s No.1 maker of memory chip testing equipment, lost 9.8% after machine orders sank by a record 16.2%. Samsung Electronics Co., the largest television sets maker globally, fell 6.1% after US retail sales declined for a sixth month. Woori Financial Holdings Co. led South Korean banks lower as the won weakened and a government official said the country’s growth would fall short of estimates. BHP Billiton Ltd lost 6.6% after metals prices slumped.
The MSCI Asia Pacific Index declined 3.8% to 83.58 as of 7.20pm in Tokyo, set for its lowest close since 8 December. All 10 industry groups on the gauge lost ground. The cost of protecting Asia-Pacific bonds from default rose, while the region’s currencies fell as investors fled equities.
Facing headwinds: A man walks past a stock index board in Tokyo on Thursday. Japan’s machine orders decreased 16.2% in November from the previous month, the biggest decline since the current survey began. Koji Sasahara / AP
The market looks like it is pointing down for now as investors are afraid of what could happen next, said Hiroshi Chano, who helps manage the equivalent of $7.3 billion (Rs35,843 crore) at Yasuda Asset Management Co. in Tokyo. The market is really not very cheap when examined from an earnings standpoint.
Japan’s Nikkei 225 Stock Average tumbled 4.9% to close at 8,023.31, the sharpest decline since 12 December.
Banks and auto makers dragged down South Korea’s Kospi index 6%, the biggest sell-off since 20 November. It led declines by major markets on Thursday.
The Bombay Stock Exchange’s Sensitive Index, or Sensex, fell 3.5% to the lowest since 5 December.
Growth in the global economy will slow to 2.2% this year, a rate equivalent to a global recession, the International Monetary Fund (IMF) had said in November. Companies in the MSCI Asia benchmark reported an aggregate 32% drop in profit in the latest quarter, according to Bloomberg data. The gauge has given up more than one-third of the gains it made since falling to a five-year low on 20 November.
US stocks retreated the most in six weeks on Wednesday, with the Standard and Poor’s 500 Index losing 3.4%. Futures on the gauge fell 0.5% in trading on Thursday.
Advantest dropped 9.8% to 1,213 yen (Rs678.45). Fanuc Ltd, the world’s No.1 maker of industrial robots, lost 4.2% to 5,660 yen. Hitachi Construction Machinery Co., the largest maker of giant excavators, shed 9% to 1,006 yen.
Japan’s machine orders, an indicator of capital spending in the next three-six months, decreased 16.2% in November from the previous month, the cabinet office said on Thursday, the biggest decline since the current survey began in 1987. Economists had estimated an 8% slump.
Samsung slid 6.1% to 459,500 won (Rs17,026) in Seoul, its steepest drop since 24 October. Westfield Group, the world’s No. 1 shopping centre owner by market value, slipped 2.5% to Australian $12.29 (A$, Rs411) in Sydney.
US retail sales dropped for a sixth month with a 2.7% slump in December, the longest stretch of declines since the tallies began in 1992, the commerce department said on Wednesday. That’s at least twice the drop economists had estimated.
With demand dropping like an ebb tide, manufacturers have no choice but to cut investments, said Hisakazu Amano, head of fund management at T&D Asset Management Co., which oversees about $39 billion. US retail sales will remain poor for quite some time, demand there will not recover easily.
Woori Financial, operator of South Korea’s second largest bank, plunged 11% to 7,560 won. Mizuho Financial Group Inc., Japan’s third biggest listed bank by assets, retreated 5.5% to 240 yen. Fubon Financial Holding Co., Taiwan’s second largest listed financial services company by market value, declined 6.9% to New Taiwan $20.25 (Rs30.45).
Mitsubishi UFJ Financial Group Inc. fell 1.5% to 516 yen. Japan’s biggest lender by value said after the close of trading it will record a 288 billion yen charge for stock holdings that have dropped in value, which may force the bank to post its first loss since forming in 2005.
South Korean financial shares were also hurt as the won weakened to the lowest in a month against the dollar, raising the cost of servicing foreign currency debt. Vice-finance minister Bae Kook Hwan said the country’s economic growth in 2009 is likely to fall short of central bank and IMF predictions.
Seven of Asia’s 10 most active currencies, excluding the yen, declined versus the greenback, with the Malaysian ringgit and Taiwan dollar also reaching one-month lows.
The Markit iTraxx Australia index of credit-default swaps widened 15 basis points to 325 as of 3.09pm in Sydney, Westpac Banking Corp. prices show, while the benchmark gauge for Japan rose 10.5 basis points to 305 at 1.05pm in Tokyo, according to Credit Suisse Group AG.
Nortel Networks Corp., the phone equipment maker that was once Canada’s largest firm by market value, filed for bankruptcy on Wednesday, triggering about $1.5 billion of derivatives protecting against a default on the firm’s bonds.
BHP, the world’s largest mining company, lost 6.6% to A$28.90 after agreeing to higher copper processing fees. Rio Tinto Group, the third largest, plunged 8.2% to A$37.30 after appointing steel executive Jim Leng to replace chairman Paul Skinner and saying iron ore output fell 18% in the fourth quarter as steel makers idled furnaces.
Australia’s Alumina Ltd, partner in the world’s biggest producer of the material used to make aluminium, lost 8.5% to A$1.29. Jiangxi Copper Co., China’s second biggest smelter, fell 2.5% to Hong Kong $5.75 (Rs37.04).
A measure of six metals traded on the London Metal Exchange declined 2.5% on Wednesday, as prices for nickel, copper and aluminium fell.
Hyundai Motor Co. slid 10% to 43,000 won, the steepest drop since 24 November, while Kia Motors Corp. lost 11% to 6,950 won. South Korea’s biggest car makers had their debt ratings cut to junk levels by Fitch Ratings as the deepening global recession curbs auto sales.
Masaki Kondo in Tokyo, Ian Sayson in Manila and Shani Raja in Sydney contributed to this story.