Asian stocks declined for a third- straight week, with the regional benchmark index within a percent of erasing October’s gains, amid concern about China’s property sector and evidence that Europe’s debt crisis is infecting major economies.
HSBC Holdings Plc and Commonwealth Bank of Australia led declines among lenders amid concern about contagion in Europe as Spain holds a general election this weekend. China Overseas Land & Investment Ltd, the biggest mainland developer listed in Hong Kong, slid 6.9 per cent after home prices in 33 Chinese cities dropped and the country’s banking regulator said loans to developers may sour. BHP Billiton Ltd, the world’s biggest mining company, fell 4.4 per cent, as copper futures dropped for a third week.
“There will be pressure on European banks, as the crisis drags on and that might have some global impact,” said Yoji Takeda, who manages about $1.1 billion at RBC Investment Management (Asia) Ltd in Hong Kong. “China is trying to fine- tune its monetary policy to orchestrate a soft-landing, but at the same time they want to see lower property prices.” (Click here for graphs)
The MSCI Asia Pacific Index dropped 2.7 per cent to 114.20 this week, extending a three-week decline to 8.4 per cent, as bond yields in Italy and Spain surged near the 7 per cent threshold that led Greece, Ireland and Portugal to seek bailouts.
Hong Kong’s Hang Seng Index declined 3.4 per cent this week, while China’s Shanghai Composite Index fell 2.6 per cent. Japan’s Nikkei 225 Stock Average fell 1.6 per cent. Australia’s S&P/ASX 200 dropped 2.8 per cent.
The BSE Sensex slumped 2.1 per cent, the most among the Asia-Pacific indexes, as the rupee dropped against the dollar for a third week as Europe’s worsening debt crisis prompted investors to favor safer assets such as the dollar.
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US DEBT
Stocks declined this week as Fitch Ratings said the creditworthiness of US banks will deteriorate if Europe’s debt crisis spreads beyond the Europe’s five most-troubled nations. In the US, Republicans and Democrats on a congressional committee are struggling to find a compromise before a November 23 deadline to produce a US deficit-cutting plan.
HSBC, Europe’s largest bank, fell 4 per cent to HK$59.25 in Hong Kong. Commonwealth Bank, Australia’s no 1 lender, retreated 3.8 per cent to A$47.73 in Sydney and was the biggest drag on a measure of financial companies in the Asia-Pacific index. Standard Chartered Plc, a London-based bank that makes most of its revenue in emerging markets, declined 7.5 per cent to HK$159.40.
POLITICAL TURMOIL
The sovereign-debt crisis has stirred political turmoil across Europe, with Italy and Greece replacing their leaders this month. Spain may speed up the timetable for forming a new government after the election on November 20, so the first Cabinet meeting can be held on December 23, ABC reported, citing officials in the People’s Party it didn’t name.
Exporters to Europe also dropped after the Bank of England said on November 16 Britain’s economy faces a ‘markedly weaker’ outlook and Spain cut its economic forecast.
Esprit Holdings Ltd, the clothier that counts Europe, as its biggest market, tumbled 8.5 per cent to HK$9.10 in Hong Kong. Canon Inc, the camera maker that gets about 32 per cent of sales from Europe, dropped 2.5 per cent to ¥3,350 in Tokyo. Mazda Motor Corp, the Japanese carmaker most dependent on Europe, declined 2.8 per cent to ¥137.
‘HIGH RISK’
Chinese property developers and lenders fell as a government report showed home prices fell in 33 of 70 cities monitored by the government in October. The China Banking Regulatory Commission told lenders last week to step up debt restructuring for struggling local government financing vehicles and cut “high-risk” loans to developers, a person with knowledge of the matter said.
China Overseas Land sank 6.9 per cent to HK$12.38. China Resources Land Ltd, a state-owned developer, slumped 5.3 per cent to HK$10.70. Industrial & Commercial Bank of China Ltd, the nation’s biggest lender, dropped 8.3 per cent to HK$4.44.
Gauges of raw material and energy producers led declines among the 10 industry groups in the MSCI Asia Pacific as copper futures decreased for a second week and a six-week rally in crude oil fizzled out.