Asian Stocks Drop Most in 8 Months on Cyprus Deposit Tax

By Adam Haigh & Jonathan Burgos 

Asian stocks headed for the biggest decline in eight months, led by raw-material producers, amid concern an unprecedented levy on bank deposits in Cyprus will plunge Europe back into crisis and that China will increase efforts to curb property prices.

Every benchmark gauge in the Asia-Pacific dropped and all industry groups on the regional measure fell. Toyota Motor Corp. (7203), the world’s biggest automaker, slid 2.6 percent as the yen gained against all its major peers. Esprit Holdings Ltd., a Hong Kong-based clothier that counts Europe as its No. 1 market, dropped 2.2 percent. BHP Billiton Ltd. (BHP) fell 2.2 percent in Sydney, leading mining companies lower. The MSCI Asia Pacific Index (MXAP) sank 1.7 percent to 134.34 as of 2:09 p.m. in Tokyo, headed for its biggest decline since July, with five shares falling for each that gained. The measure rose 5.6 percent this year through last week as improving economic data from the U.S. and speculation thatJapan will unleash more stimulus countered China’s efforts to rein in property prices.

“The inevitable bailout of Cyprus has come and that’s setting a precedent that isn’t great,” said Angus Gluskie, managing director at Sydney-based White Funds Management, which oversees more than $350 million. “Its financial impact is negligible, but markets are reacting negatively because people have been looking for a reason to sell. The Chinese situation is a much more pertinent issue.”

The MSCI Asia Pacific Index has rallied in the past four months as central banks maintained loose monetary policies. Shares on the gauge traded at 14.7 times estimated earnings last week compared with 14 times for the Standard & Poor’s 500 Index and 12.7 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

‘Deeper Downturn’

“The safest place to be if you think the market’s going to go down is cash,” Donald Williams, Sydney-based chief investment officer at Platypus Asset Management Ltd., which manages about $1 billion, told Bloomberg Television. “We’ve been finding valuations problematic for about six weeks and as a result we’ve built up cash in our portfolio. We’re looking for a deeper downturn than what we’re seeing today. There are no sectors that are particularly cheap right now. We’re only looking for a 10 percent correction at the most.”

Japan’s Nikkei 225 Stock Average (NKY) retreated 2 percent. Australia’s S&P/ASX 200 Index dropped 2 percent, led by BHP Billiton. South Korea’s Kospi Index lost 0.7 percent, Taiwan’s Taiex fell 1.2 percent and Singapore’s Straits Times Index declined 0.8 percent.

Hong Kong’s Hang Seng Index tumbled 2.2 percent, the most since Feb. 5, with volume 64 percent above its 30-day average for the time of day. China’s Shanghai Composite Index fell 1.1 percent.

Property Curbs

China on March 1 imposed its toughest real-estate curbs in a year, ordering the central bank to raise down-payment requirements and interest rates for second mortgages in cities with excessive price gains, enforcing a property sales tax and telling local governments with the biggest price pressures to tighten home-purchase limits.

Home prices in China climbed in 62 cities of the 70 the government tracks in February from a year earlier, the National Bureau of Statistics said today. Cities will be forced to introduce new price-control measures as upward pressure on prices will definitely increase in short term, Credit Suisse analyst Jinsong Du said in and e-mail.

U.S Futures

Futures on the Standard & Poor’s 500 Index dropped 1.4 percent today. The S&P 500 climbed on March 14 to within two points of its record closing level of 1,565.15 set in October 2007, before retreating on the final day of trading last week.

Cypriot President Nicos Anastasiades bowed to demands by euro-area finance ministers to raise 5.8 billion euros ($7.5 billion) to help fund a bailout by taking a piece of every bank account in Cyprus. Anastasiades delayed a vote on the measure in parliament until today, a day later than planned, as he seeks more time to convince lawmakers to back him.

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co. inNewport Beach, California, said on Twitter that the concern in Cyprus “moves risk-on trade to back seat.” He added: “Sell euro as well.”

“If it happened three years ago, you had to be pretty worried because the U.S. economy was a lot more fragile and there was more concern about China having a hard landing,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has $126 billion under management. “The general trend is improving rather than getting worse. So, it’s coming at a time when the world is stronger.”

Euro Weakens

The euro dropped against the dollar to its lowest level this year and the yen strengthened against all major currencies. Exporters fell, with Toyota Motor losing 2.6 percent to 4,890 yen and Nissan Motor Co. declining 3.2 percent to 954 yen. Esprit retreated 2.2 percent to HK$9.10.

The HSI Volatility Index, a gauge of Hong Kong-listed options prices, surged 12 percent to 17.07, the highest level in three weeks and indicating traders expect a swing of about 4.9 percent during the next 30 days.

BHP Billiton, the world’s largest mining company, fell 2.2 percent to A$34.76 in Sydney as commodity stocks led declines on the Asian benchmark index.

Panasonic Corp. (6752), Japan’s No. 2 TV maker, rose 1.6 percent to 699 yen as the Nikkei newspaper reported the electronics maker may exit the plasma-television market. The company is “seeking various growth strategies for the TV business,” spokeswoman Chieko Gyobu said today.

To contact the reporters on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net

source

please give me comments thanks