Asian Stocks Erase Gain as Topix Drops on Strong Yen

By Jonathan Burgos & Yoshiaki Nohara

Asian stocks dropped, with the regional benchmark index retreating from a five-year high. Japan’s Topix Index erased gains as the yen strengthened, dimming the outlook for the nation’s exporters.

Canon Inc. (7751), which loses almost $80 million for every 1 yen Japan’s currency gains against the dollar, fell 1.3 percent. Bridgestone Corp., the world’s biggest tire maker, sank 6.3 percent in Tokyo after keeping its full-year profit forecast below analyst estimates. GS Engineering & Construction Corp. jumped 6.7 percent in Seoul after the Bank of Korea cutinterest rates. The MSCI Asia Pacific Index slipped 0.2 percent to 143.13 as of 2:48 p.m. in Tokyo, with seven shares falling for every six that rose. The gauge increased 11 percent this year through yesterday amid speculation the Bank of Japan will deploy more measures to beat deflation as policy makers in the U.S. and Europe remain on standby to buoy growth.

“It’s not surprising that shares slipped bit after big gains,” saidSoichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages the equivalent of about $61 billion. “It’d be odd if they didn’t have a correction.”

Shares on the gauge traded at 14.3 times estimated earnings yesterday compared with 20.7 times for the Nikkei 225 (NKY)Stock Average, 14.8 for the Standard & Poor’s 500 Index and 13.3 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

The Nikkei 225’s 14-day relative strength index, which measures trading momentum, climbed above the 70 threshold for a third day, indicating to some traders that shares have risen too far, too fast. The gauge rose 37 percent this year through yesterday, making it the best-performing developed market benchmark equity index in the world.

Shares Inexpensive

“The market may have a correction after rising so steeply, but valuation-wise you can’t say shares are very expensive,” said Masaru Hamasaki, a Tokyo-based strategist at Sumitomo Mitsui Asset Management Co., which oversees the equivalent of $103 billion.

Japan’s Nikkei 225 fell 0.3 percent. The broader Topix Index (TPX) slipped 0.8 percent, erasing an advance of as much as 0.7 percent. The Japanese yen climbed as much as 0.3 percent against the dollar today, paring this week’s decline. A stronger yen reduces the value of exporters’ earnings when repatriated.

Australia’s S&P/ASX 200 Index slid 0.3 percent even after a report showed the nation’s unemployment rate fell in April as companies hired more workers than analysts estimated. New Zealand’s NZX 50 Index was little changed.

China’s Shanghai Composite Index slipped 1 percent. The country’s consumer prices rose 2.4 percent last month from a year earlier, while producer prices fell 2.6 percent, the National Bureau of Statistics said today in Beijing. Hong Kong’s Hang Seng Index dropped 0.4 percent.

Kospi Jumps

South Korea’s Kospi Index jumped 1.2 percent after the nation’s central bank today joined Australia, Europe and India in cutting interest rates. Taiwan’s Taiex Index added 0.2 percent and Singapore’s Straits Times Index climbed 0.5 percent.

Futures on the S&P 500 Index were little changed today. The gauge yesterday climbed 0.4 percent, a fifth day of gains, as earnings forecasts from Whole Foods Market Inc. and Electronic Arts Inc. beat estimates.

To contact the reporters on this story: Jonathan Burgos in Singapore atjburgos4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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