Asian Stocks Drop on Cyprus as Japan Bonds Surge, Gold Declines

By Jae Hur 

Most Asian stocks slid after the biggest gain in almost three weeks on concern Cyprus’s bailout plan will be used as a template for other nations, imperiling bondholders and depositors. Japan’s bonds surged and gold fell.

The MSCI Asia Pacific Index (MXAP) lost 0.1 percent at 2:05 p.m. in Tokyo after rising the most since March 6 yesterday. Futures on the Standard & Poor’s 500 Index were up 0.2 percent. The yields of Japan’s 10-year bonds touched 0.525, the least since June 2003. Gold fell 0.2 percent, sliding for a third day. Bank of Japan (8301) Governor Haruhiko Kuroda said he’ll consider extending bond maturities for the bank’s asset purchase fund. South Korea’s economy grew less than previously estimated in the fourth quarter, boosting the case for stimulus by the new government. Cyprus’s bailout plan to tax bank depositors has cast doubt on the safety of financial assets in Europe, sending U.S. stocks lower and the euro to a four-month low yesterday.

“Cyprus doesn’t help in the sense that reminds us the EU leadership is basically improvising from solution to solution,” said Mikio Kumada, a Hong Kong-based global strategist for LGT Capital Management, which oversees more than $25 billion.

The yen was little changed at 94.19 per dollar, paring an earlier drop after Kuroda outlined monetary easing options to achieve a 2 percent annual inflation goal in two years. The euro was at $1.2866, holding its biggest drop in more than eight months before debt auctions in Italy where lawmakers are still trying to form a government after inconclusive elections last month.

Debt Auctions

Italy is set to sell bills today and bonds due in 2018 and 2023 tomorrow. The euro zone’s fourth-biggest economy auctioned 2.8 billion euros ($3.6 billion) of 2014 zero-coupon bonds yesterday at the highest since Dec. 27.

Democratic Party leader Pier Luigi Bersani has two days left to overcome a shortfall of support in parliament, after President Giorgio Napolitano gave him a mandate on March 22 to try to form a government. Bersani will meet adversary Silvio Berlusconi’s deputies at the People of Liberty party today.

“With the political risk in Italy continuing, it will be hard for the euro to make any headway,” said Yuki Sakasai, a foreign-exchange strategist at Barclays Plc in New York.

South Korea’s gross domestic product grew 0.3 percent from the third quarter, compared with January’s initial estimate of a 0.4 percent expansion, the Bank of Korea said today. GDP rose 1.5 percent from a year ago, the smallest gain since 2009. The won rose as much as 0.5 percent to 1,105.65 per dollar, the strongest since March 14, before trading at 1,106.35.

Stocks

Slower growth in Asia’s fourth-largest economy strengthens the rationale for a supplementary budget that President Park Geun Hye may announce this week. Finance Minister Hyun Oh Seok said March 23 that the yen, down 19 percent against the won in the past six months, is “flashing a red light” for exports and urged the Group of 20 nations to revisit the issue.

Five shares fell for every four that advanced on regional benchmark equity index. Japan’s Topix Index slid 0.3 percent, while South Korea’s Kospi Index rose 0.4 percent. Australia’s S&P/ASX 200 fell 0.7 percent.

The Hang Seng Index (HSI), the second worst-performing primary gauge in the developed world this year, slid 0.4 percent in Hong Kong, heading for its biggest monthly decline since May, as Chinese developers dropped after a report that banks are capping lending to the property sector.

The cost of insuring corporate and sovereign bonds in the Asia-Pacific region against non-payment rose, according to traders of credit-default swaps.

Bond Risk

The Markit iTraxx Australia index increased 3.5 basis points to 121.5 basis points as of 11:05 a.m. in Sydney, Westpac Banking Corp. prices show. The measure, which rolled to a new series on March 20, is set for its highest close since Feb. 4, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan gained 2 basis points to 120 in Hong Kong, Royal Bank of Scotland Group Plc prices show. The benchmark, which has ranged from 100.5 to 120.8 since Dec. 31, is set for its highest close since March 22, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

The Philippine peso weakened to its lowest level in almost three months on speculation the central bank will implement more measures to curb capital inflows. The peso fell 0.3 percent to 40.96 per dollar at the noon trading break, the lowest since Jan. 2, according to Tullett Prebon Plc.

Gold for immediate delivery dropped 0.2 percent to $1,601.16 an ounce, while oil for May delivery was little changed at $94.79 a barrel in New York after touching a five- week high yesterday.

Tin dropped by the most in a week as industrial metals fell on concern that further property curbs in China may damp demand. The metal for delivery in three months lost 1.3 percent, the most since March 20, to $22,900 a metric ton on the London Metal Exchange.

To contact the reporter on this story: Jae Hur in Tokyo at jhur1@bloomberg.net

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