Asian stocks fell for the first time in three days on concern the region’s economic recovery may falter after a Bank of Japan (BOJ) survey showed companies plan to deepen investment cuts.
Fanuc Ltd., Japan’s largest maker of robots, fell 3.1 percent after the central bank’s Tankan report showed companies will cut capital spending 10.8 per cent this year. Hyundai Motor Co., South Korea’s largest auto maker, slumped 8.1 per cent on concern export earnings will be hurt after the won rose against the dollar and Chicago business activity dropped. Advantest Corp. slumped 5.8 per cent after Credit Suisse Group cut its rating.
“The data is looking a bit more mixed,” said Rob Patterson, who helps manage $3.4 billion at Argo Investments Ltd. in Adelaide. “The rally has been very strong and probably a bit overdone. We need more evidence of an economic recovery and the proof will be in the next earnings results.”
The MSCI Asia Pacific Index declined 1.2 per cent to 116.60 as of 7:27 p.m. in Tokyo, following a two-day, 0.6 per cent advance. The gauge has surged 65 per cent from a five-year low on March 9 as stimulus measures around the world dragged economies out of recession.
Japan’s Nikkei 225 Stock Average sank 1.5 per cent, while South Korea’s Kospi Index lost 1.7 per cent. Australia’s S&P/ASX 200 Index dropped 0.9 per cent. Markets in Hong Kong and China are closed for holidays.
Elpida Memory sank 8.6 per cent in Tokyo after the US vowed to use World Trade Organization sessions to press Japan over subsidies to the chip maker. In Seoul, ship builder Hanjin Heavy Industries & Construction Co. slumped 6.5 per cent in Seoul, falling for a second day on concern France’s CMA CGM will cancel new vessels. StarHub Ltd. fell 6.5 per cent in Singapore after losing sports-channel broadcast rights.
Business index
Futures on the Standard & Poor’s 500 Index dropped 0.4 per cent. The gauge fell 0.3 per cent yesterday after the Institute for Supply Management-Chicago Inc. said its business measure decreased to 46.1 in September, while economists had projected the gauge would rise.
Fanuc dived 3.1 per cent to 7,800 yen, while Kawasaki Heavy Industries Ltd., the maker of Japan’s first industrial robots, dropped 4 per cent to 219 yen.
Japanese large enterprises plan to cut capital spending by 10.8 per cent in the year to March 2010, more than the 9.4 per cent reduction foreseen three months ago, according to the BOJ’s quarterly Tankan survey released this morning. Economists had estimated a 9 per cent decrease.
“The current business climate is hardly enticing companies to invest,” said Yoshinori Nagano, a senior strategist at Tokyo- based Daiwa Asset Management Co., which oversees the equivalent of $96 billion. “The economy is not in good shape yet.”
Stronger won
Stocks also sank after the ISM’s Chicago report, while separate figures from ADP Employer Services showed that US companies cut payrolls by 254,000 jobs last month, more than economists estimated.
Toyota Motor Corp., which got 31 per cent of its revenue in North America last year, lost 1.7 per cent to 3,510 yen. Canon Inc., which makes digital cameras and office equipment, dropped 2.8 per cent to 3,530 yen.
Hyundai Motor dropped 8.1 per cent to 102,500 won as the stronger won threatened to cut the repatriated value of overseas sales for the company, which last year earned 62 per cent of revenue outside South Korea.
The stock fell even after Hyundai Motor reported a 61 per cent jump in September sales.
Kia Motors Corp., South Korea’s second-biggest carmaker, slumped 6.7 per cent to 17,350 won.
Best performer
The won, Asia’s best performing currency against the dollar in September, was recently little changed at 1,178.25 versus the US currency, according to data compiled by Bloomberg. The won earlier climbed to the highest in a year after South Korea said exports last month dropped at the slowest pace since November.
The climb in Asian equities in the past seven months has been fueled by better-than-estimated economic and earnings reports. Australian retail sales climbed 0.9 per cent in August, the first gain in three months, the country’s statistics bureau reported yesterday.
Confidence among Japan’s largest manufacturers increased for a second-straight quarter, rising to minus 33 from minus 48 in June, BOJ’s Tankan survey showed on Thursday. The number matched economists’ estimates. A negative figure means pessimists outnumber optimists.
Rising valuations
The MSCI index gained 14 per cent last quarter, less than the previous three months’ 28 per cent advance, as concerns emerged the stock rally may have overvalued company earnings prospects. The average price of the gauge’s shares rose to 1.6 times book value on September 17, up from 1 at the measure’s five- year low on March 9.
The index added 4.1 per cent in September, a seventh monthly advance that was its longest stretch of gains since the 10 months ended July 2007.
Advantest, the world’s largest maker of memory-chip testers, slumped 5.8 per cent to 2,345 yen. The company was downgraded to “underperform” from “neutral” at Credit Suisse.
Elpida, Japan’s biggest computer memory-chip maker, sank 8.6 per cent to 1,076 yen. US Trade Representative Ron Kirk promised in a letter made public yesterday to use sessions at the WTO over subsidies and a separate meeting of countries with semiconductor production to get more information from Japan and Taiwan about the aid to Elpida.
Hanjin Heavy slumped 6.5 per cent to 22,150 won as Lloyd’s List reported the company may be the most at risk among South Korean shipyards of having orders canceled by CMA CGM, the world’s third-largest container line.
CMA CGM said two days ago it will renegotiate or cancel orders as it begins talks with creditors on debt restructuring in a bid to stave of bankruptcy. Hanjin Heavy tumbled 11 per cent yesterday.
In Singapore, StarHub fell 6.5 per cent to S$2.03 after it lost the right to broadcast Barclays Premier League football games and ESPN Star Sports to Singapore Telecommunications Ltd. SingTel, as Southeast Asia’s biggest telephone operator is known, added 0.3 per cent to S$3.26.
