Asian stocks fall on fear of stimulus withdrawal

Asian stocks fall on fear of stimulus withdrawal
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First Published: Thu, Nov 12 2009. 11 00 PM IST

Decoding: A man looks at stock quotes on an electronic screen at a brokerage house in Shanghai, China, on Thursday. Aly Song / Reuters
Decoding: A man looks at stock quotes on an electronic screen at a brokerage house in Shanghai, China, on Thursday. Aly Song / Reuters
Updated: Thu, Nov 12 2009. 11 00 PM IST
Singapore: Asian stocks fell, dragging the MSCI Asia Pacific Index down for the first time in five days, as Chinese Premier Wen Jiabao said the global economy faces a slow and bumpy recovery.
China Mobile Ltd and Industrial and Commercial Bank of China Ltd fell at least 1.5% in Hong Kong. Hisamitsu Pharmaceutical Co. and Tsumura and Co. sank more than 7% in Tokyo as a government committee recommended lowering drug expenses. Rio Tinto Group, the world’s No. 3 mining company, climbed 1.8% in Sydney as metal prices advanced. Honda Motor Co., Japan’s second biggest car maker, rose 1.8% after Goldman Sachs recommended buying the stock.
The MSCI Asia Pacific Index dropped 0.4% to 118.31 as of 7:14pm in Tokyo, with two stocks falling for each one that advanced. The gauge has lost 2.4% from a 13-month high on 20 October amid concern the withdrawal of government stimulus measures will cause the global recovery to falter.
Decoding: A man looks at stock quotes on an electronic screen at a brokerage house in Shanghai, China, on Thursday. Aly Song / Reuters
Concerns about whether the recovery is sustainable or not are weighing on shares, said Hiroshi Morikawa, a senior strategist in Tokyo at MU Investments Co., which manages the equivalent of $14 billion (Rs65,100 crore).
Japan’s Nikkei 225 Stock Average fell 0.7% as the country’s producer prices declined for a tenth month. Australia’s S&P/ASX 200 Index lost 0.2% even as the government reported an unexpected increase in jobs last month. The Kospi index dropped 1.4% in South Korea, where the nation’s central bank left its benchmark interest rate at a record low.
Low borrowing costs?
Changes to MSCI Inc.’s global indexes moved some stocks. Yangzijiang Shipbuilding Holdings Ltd surged 6.1% in Singapore and Greentown China Holdings Ltd gained 6.6% in Hong Kong after they were added. Guangshen Railway Co., which was removed, fell 3.2% in Hong Kong.
Futures on the Standard & Poor’s 500 Index slipped 0.4%. The measure advanced 0.5% to a 13-month high in New York on Wednesday, as China’s industrial production surged and as Federal Reserve policymakers signalled interest rates will remain at a record low.
San Francisco Fed Bank president Janet Yellen raised the prospect of a jobless recovery in a speech in Phoenix, while Dennis Lockhart, who heads the Atlanta Fed, predicted a relatively subdued pace of growth this quarter and beyond.
China will maintain a moderately loose monetary policy and a proactive fiscal stance and continue to fine-tune its 4 trillion yuan ($586 billion) stimulus plan, Wen said in a televised speech. Hong Kong’s Hang Seng index sank 1%, while China’s Shanghai Composite Index dropped 0.1%.
Japanese drug makers
China Mobile, the world’s largest cellphone operator by users, lost 1.5% to HK$74.35. Industrial and Commercial Bank, the nation’s biggest lender, fell 1.6% to HK$6.67.
A gauge of healthcare stocks on the MSCI Asia Pacific Index lost 1.3%, the most of 10 industry groups. Hisamitsu Pharmaceutical, which makes anti-inflammatory plasters, sank 7.4% to 2,860 yen. Tsumura dropped 7% to 2,855 yen. Takeda Pharmaceutical Co., Asia’s largest drug maker, lost 1.4% to 3,520 yen.
The Government Revitalization Unit, tasked with cutting waste from the national budget, said branded-drug prices are too high and should be lowered to the levels of generic medicines to trim medical expenses, according to the minutes of the committee’s meeting on Wednesday.
The MSCI Asia Pacific Index’s rally since March has driven the average price of stocks in the gauge to 22 times estimated profit, compared with 17 times for the S&P 500 and 15 times for the Dow Jones Stoxx 600 Index.
Global revival
The gauge has surged 68% from a more than five-year low on 9 March on signs stimulus policies introduced around the world were starting to revive the global economy. The gauge fell 1.3% last month, the first monthly decline since February, as Australia’s central bank raised interest rates, while India’s shifted policy focus toward stemming inflation.
The Bank of Korea on Thursday maintained its seven-day repurchase rate at a record low of 2% as it sought to strengthen the economy before increasing borrowing costs.
Australia’s unemployment rate rose to 5.8% last month from 5.7% in September, government data released on Thursday showed. Employers added 24,500 workers in October, compared with economists’ expectations for a decline of 10,000. In Sydney, Rio Tinto climbed 1.8% to A$69.84. BHP Billiton Ltd, the world’s biggest mining company, advanced 1.2% to A$39.55. Mitsui and Co., which gets 30% of sales from commodities, rose 1.5% to 1,197 yen in Tokyo.
Record gold prices
Gold added 0.5% in New York to $1,120.60 an ounce today, after earlier reaching a record $1,120.90. It was the ninth day of gains for the precious metal’s futures. The London Metals Index, a measure of six metals including copper and zinc, added 0.2% on Wednesday.
Honda Motor climbed 1.8% to 2,905 yen as Goldman Sachs added the stock to its conviction buy list. The company said on Wednesday it is developing a small car for India, which prefers compact cars.
FamilyMart Co., a Japanese convenience-store operator, rose 1.6% to 2,525 yen. The Nikkei newspaper said the company and its top shareholder, Itochu Corp., plan to purchase Am/pm Japan Co., a competitor, for about 10 billion yen ($111 million).
In Singapore, Yangzijiang Shipbuilding, a China-based shipbuilder, surged 6.1% to S$1.05 after the company was included in MSCI’s indexes. Greentown China, a real estate developer, gained 6.6% to HK$12.36 in Hong Kong. Guangshen Railway lost 3.2% to HK$3.36.
MSCI changes
MSCI is raising the number of Chinese and Brazilian stocks in its global standard indexes following a semi-annual review, reflecting a rally in the world’s two largest developing markets.
Emerging markets’ contribution to global gross domestic product has been increasing substantially in recent years but from an indexes point of view, they still have a very small weighting overall, said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which holds $75 billion in assets. That’s a trend that we’re likely to see over the coming years.
Adjustments in the MSCI indexes may cause shares chosen for inclusion to advance and those slated for deletion to drop as funds mirroring the benchmarks buy and sell stocks in accordance with those changes. The company estimates more than $3 trillion in funds are benchmarked against its indexes globally.
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First Published: Thu, Nov 12 2009. 11 00 PM IST
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