Asian stocks fell, led by finance and mining companies, on concern a slowdown in lending may derail a recovery in China, the world’s third-largest economy.
Industrial Bank slumped 9 per cent in Shanghai after Caijing magazine reported that the nation’s banks may have cut new loan growth. Baoshan Iron & Steel Co. fell 7 per cent in Shanghai after the first-half profit plunged 93 per cent. Canon, which gets 28 per cent of its revenue from the Americas, sank 3.3 per cent as the Democratic Party of Japan’s election victory drove the yen higher.
The MSCI Asia Pacific Index lost 0.7 per cent to 113.18 as of 6:16 p.m. in Tokyo. The gauge has surged 60 per cent from a more than five-year low on March 9 on speculation the global economy is recovering. That’s taken the average price of stocks on the index to 1.5 times the book value, close to an 11-month high.
“Stocks have rallied a long way and are technically overbought,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which manages about $75 billion. “We probably need a good correction ahead of the next jump.” The Shanghai Composite Index slumped 6.7 per cent, the most since June 10, 2008. China Merchants Bank Co. fell 6.3 per cent amid plans to raise the size of a rights offer.
Hong Kong’s Hang Seng Index lost 1.9 per cent, led by China Petroleum & Chemical Corp., which fell 3.9 per cent on concern the government will keep fuel prices unchanged to support the economy as crude climbs, squeezing margins.
ANZ Bank, Ibiden
Among stocks that rose today, Australia & New Zealand Banking Group jumped 4.1 per cent after saying profit rose. Ibiden, which supplies printed circuit boards to Intel Corp., climbed 4.4 per cent in Tokyo after the US company boosted its sales forecast.
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Futures on the US Standard & Poor’s Index fell 0.5 per cent. The gauge dropped 0.2 per cent on August 28.
Japan’s Nikkei 225 Stock Average lost 0.3 per cent, reversing an earlier 2.2 per cent climb. Government reports showed factory output rose at the slowest pace in four months in July and retail sales fell, underscoring the challenge for the incoming government to sustain economic recovery.
The DPJ routed the Liberal Democratic Party in Japan’s national elections, capturing 308 of 480 lower-house seats, national broadcaster NHK said. The DPJ has pledged to revive an economy emerging from its deepest recession since World War II by boosting child-care spending, cutting taxes and limiting the power of bureaucrats.
Worst performing index
The Shanghai Composite Index has fallen 21 per cent in the past month, making it the world’s worst performing major stock index in that time, as banks reined in lending to avert asset bubbles and policy makers advised industries such as steel and cement to curb overcapacity.
Baoshan Iron fell 7 per cent to 6.42 yuan. The company said the “global economy hasn’t recovered substantially and the foundations for a domestic recovery aren’t solid,” threatening prospects for the steel industry.
The rally in Asian stocks since March has been driven in part by profit reports in the past month that have exceeded analyst estimates. Some 35 per cent of the 620 companies in the MSCI Asia Pacific Index that have reported net income since early July have beaten analyst predictions, while about 21 per cent have missed, according to data compiled by Bloomberg.
China Merchants Bank, the nation’s fifth-biggest by market value, dropped 6.3 per cent to 13.63 yuan. The lender posted its third consecutive quarter of declining profits as loan margins contracted and it set aside additional funds for loan defaults.
The Shenzhen-based bank said it will increase the amount raised from its planned rights offer by as much as 22 per cent.
Slowing loan growth
Industrial Bank, which reported a 4.9 per cent decline in first-half profit on August 24, slumped 10 per cent to 27.88 yuan.
China may have 200 billion yuan of new loans in August, the Beijing-based Caijing magazine reported today on its website. That compares with 355.9 billion yuan in new loans in July and 1.53 trillion yuan in June.
“The local market bears are convinced that tightening is already underway,” said Howard Wang, head of the Greater China team at JF Asset Management, which oversees $50 billion. “Sentiment can change only with either a very strong set of macro numbers in August, laying to rest that tightening will ‘break’ the recovery, or stronger statements from central authorities.”
China Petroleum slumped 3 per cent to HK$6.47, while PetroChina Co., the world’s most valuable company, sank 2.8 per cent to HK$8.56. The government will reduce the number of times it adjusts fuel prices at this “critical juncture” for the economy, Shanghai Securities News reported on August 29.
The National Development and Reform Commission, the country’s top economic planner, said the report was untrue.
Stronger Yen
In Tokyo, Canon, which makes digital cameras, sank 3.3 per cent to 3,570 yen on concern a stronger yen will hurt the value of overseas sales when repatriated back into the local currency. Honda Motor Co., which gets more than half its sales in North America, dropped 1.8 per cent to 2,935 yen.
Japan’s currency gained versus all 16 major counterparts after public broadcaster NHK said the DPJ captured at least 308 of the 480 lower-house seats. The yen appreciated to 132.68 per euro from 133.85 in New York on August 28 and strengthened to 92.77 per dollar from 93.60.
“Some are saying the market has fully reflected the change of government, but the change is too big to be priced in,” said Hisakazu Amano, who helps oversee the equivalent of $18 billion at T&D Asset Management. “The impact of the DPJ victory on company earnings is still uncertain and investors can’t decide what to buy or sell.”
ANZ Bank, Australia’s fourth-biggest bank, jumped 4.1 per cent to A$21.29. The company said profit in the 10 months ended July climbed from the same period a year earlier after lending grew and bad debts were lower than internal estimates.
Ibiden surged 4.4 per cent to 3,310 yen. Rival Shinko Electric Industries rallied 1.5 per cent to 1,736 yen.
Intel, the world’s biggest chip maker, said on August 28 that third-quarter sales will be at least $8.8 billion, compared with at least $8.1 billion projected last month. The stock jumped 4 per cent in New York on August 28.