Asian Stocks Decline as Europe Woes Deepen; Chinese Banks Fall

By Yoshiaki Nohara

Asian stocks fell, with the regional benchmark index poised to erase this month’s gain, on concern Europe’s debt crisis is deepening and after pending U.S. home sales fell.

Chinese banks slid after financial regulators tightened rules on wealth-management products and the cabinet called for new measures to deregulate interest rates. China Minsheng Banking Corp., the nation’s first non-state lender, slid 7 percent in Hong Kong. Sony Corp. (6758), an electronics maker that gets 38 percent of its revenue in Europe and the U.S., fell 3.9 percent in Tokyo. GS Yuasa Corp. plunged 11 percent in Tokyo after Mitsubishi Motors Corp. said a Yuasa lithium-ion car battery caught fire and another melted. The MSCI Asia Pacific Index dropped 0.8 percent to 135.02 as of 2:08 p.m. in Tokyo. More than two stocks fell for each that gained on the measure, which has risen 0.5 percent this week and 4.4 percent this quarter. The gauge closed at 135.06 on Feb. 28.

“The sentiment about Europe is bad,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “The uncertainty created by a bank bailout in Cyprus and the inability in Italy to form a government is weighing on the markets, reminding us that Europe is going to be a negative influence for years to come.”

Relative Value

The MSCI Asia Pacific Index rose 5.2 percent this year through yesterday on improving U.S. economic data and speculation that Japan will deploy more stimulus. The Asia benchmark traded at 15.1 times estimated earnings on average, compared with 14.1 times for the Standard & Poor’s 500 Index and 12.6 times for the Stoxx Europe 600 Index.

Japan’s Topix Index (TPX) fell 1.3 percent as the Finance Ministry reported foreign investors sold a net 267.6 billion yen ($2.8 billion) of Japanese shares last week. South Korea’s Kospi Index declined 0.2 percent, while data showed the nation’s current account surplus widened in February. Australia’s S&P/ASX 200 dropped 0.3 percent and New Zealand’s NZX 50 Index added 0.2 percent.

Hong Kong’s Hang Seng Index fell 1.2 percent, and China’s Shanghai Composite Index slumped 2.5 percent. Taiwan’s Taiex Index (TWSE) slid 0.6 percent. Singapore’s Straits Times Index lost 0.1 percent.

Markets in Hong Kong, Australia, New Zealand and Singapore will be closed tomorrow for the Good Friday holiday.

Futures on the S&P 500 (SPXL1) declined 0.4 percent today. The index slid 0.1 percent in New York yesterday as fewer Americans signed contracts to purchase previously owned homes in February.

Europe Woes

European governments and the International Monetary Fund agreed Monday to lend Cyprus 10 billion euros ($13 billion) as long as the country liquidated its second-largest bank and forced losses on bank bondholders and deposits of more than 100,000 euros.

Italian 10-year government bond yields jumped 21 basis points yesterday, the most in a month, as Democratic Party leader Pier Luigi Bersani said there was no chance of a broad coalition to end a political deadlock following February’s elections.

Exporters to Europe and the U.S. dropped, with Sony sliding 3.9 percent to 1,609 yen. HSBC Holdings Plc (5), Europe’s biggest lender, lost 1.3 percent to HK$81.80. Hutchison Whampoa Ltd. (13), an operator of retail chains that gets 53 percent of its revenue in Europe, fell 1 percent to HK$81.15.

Isolate Risks

China’s regulator told banks to limit investments of client funds in credit assets that aren’t publicly traded, and to isolate the risks from their operations. Separately, the State Council said yesterday it will take steps this year to loosen state control over interest rates and the yuan.

China Minsheng Banking fell 7 percent to HK$9.99. Industrial & Commercial Bank of China Ltd., China’s biggest lender, lost 2 percent to HK$5.34. Bank of China Ltd., the nation’s fourth-largest, slid 1.9 percent to HK$3.55.

“They are trying to monitor Chinese banks more closely, but you can’t just stop them because the real economy needs their money,” said Benjamin Tam, a portfolio manager who helps manage about $1.5 billion at IG Investment in Hong Kong. “Their assets will come under pressure.”

GS Yuasa, the Japanese maker of the batteries that overheated and grounded all Boeing Co. Dreamliner flights, slumped 11 percent to 392 yen after a battery pack caught fire while being tested at a Mitsubishi Motors factory in Japan on March 18. Another pack melted in a separate incident last week, Mitsubishi said yesterday.

Sharp Corp., the Japanese TV maker, dropped 4.3 percent to 266 yen on a report it may seek private-equity funding and sell shares, according to two people familiar with the situation. A deadline passed yesterday for Foxconn Technology Group to invest in the television maker, which is forecasting a record loss.

Newcrest Mining Ltd. (NCM), Australia’s biggest gold producer, lost 7.9 percent to A$20.15 after cutting an output forecast.

Nufarm Ltd., Australia’s largest supplier of farm chemicals, slumped 17 percent to A$3.95 in Sydney after saying full-year profit will fall on lower income from its Australian operations.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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