Most Asian Stocks Drop as Japan’s Banks Fall on Earnings

By Jonathan Burgos

Most Asian stocks fell as a decline in Japanese banks after forecasting lower earnings offset a report that Japan’s economy expanded faster than analysts estimated in the first quarter.

Mitsubishi UFJ Financial Group Inc. sank 2.9 percent, leading Japanese lenders lower. Daewoo Shipbuilding (042660) & Marine Engineering Co., South Korea’s third-biggest shipbuilder, fell 10 percent as first-quarter profit plunged. Dai-ichi Life Insurance Co. (8750), Japan’s second-largest life insurer, jumped 7.3 percent after projecting improved earnings and a stock split. The MSCI Asia Pacific Index slid 0.3 percent to 142.78 as of 12:22 p.m. Tokyo time, erasing gains of as much as 0.5 percent. About four shares fell for every three that rose on the measure. The gauge increased 11 percent this year through yesterday as the Bank of Japan took steps to counter deflation and policy makers in the U.S. and Europe remained on standby to buoy growth.

“The market, particularly in Japan, looks overbought and needs a pullback,” Nader Naeimi, Sydney-based head of dynamicasset allocation at AMP Capital Investors Ltd., which manages $126 billion, said by phone. “We’re not going to see a full reversal at this stage. The effects of aggressive monetary stimulus in Japan is just starting to gain traction.”

Selling Signal

Japan’s Nikkei 255 Stock Average dropped 1.1 percent, retreating from the highest close since January 2008. The broader Topix Index fell 1.5 percent, after earlier rising as much as 0.5 percent. The 14-day relative strength index, a measure of trading momentum, has held above 70 for both gauges, a level some traders say signals a sell-off.

The Nikkei 225 and the Topix both climbed about 45 percent this year through yesterday as the Bank of Japan introduced unprecedented monetary easing and the U.S. economyshowed recovery signs.

Japan’s gross domestic product rose an annualized 3.5 percent in the three months through March, the most in a year, the Cabinet Office said today in Tokyo. The median of 36 economist forecasts in a Bloomberg News survey was for 2.7 percent. Fourth-quarter growth was revised to 1 percent.

Australia’s S&P/ASX 200 Index lost 0.1 percent, while South Korea’s Kospi index advanced 1 percent. Hong Kong’s Hang Seng Index added 0.3 percent and China’s Shanghai Composite Index gained 0.4 percent.

Relative Value

Shares on the MSCI Asia Pacific Index traded at 14.4 times estimated earnings yesterday, compared with 21 for the Nikkei 225 (NKY), 15 for the Standard & Poor’s 500 Index and 13.4 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Futures on the Standard & Poor’s 500 Index were little changed today. The index rose 0.5 percent to a fresh record in New York yesterday after data showing weakness in manufacturing fueled bets the Federal Reserve will be in no hurry to scale back stimulus. Industrial production declined in April by the most in eight months.

Japanese lenders declined as companies from Mitsubishi UFJ, Japan’s biggest publicly traded lender by market value, to Sumitomo Mitsui Financial Group Inc. forecast earnings will drop this year as monetary easing makes loans less profitable even as borrowing picks amid an economic recovery.

Mitsubishi UFJ slipped 2.9 percent to 711 yen. Sumitomo Mitsui lost 2.4 percent 4,795 yen. Mizuho Financial Group Inc. declined 2.7 percent to 220 yen.

Daewoo, Virgin

Daewoo Shipbuilding slumped 10 percent to 25,600 won in Seoul. The company reported yesterday that first-quarter net income plunged 42 percent from a year earlier to 48.9 billion won ($43.9 million). Macquarie Group Ltd. reduced its rating on the stock to neutral from outperform.

Virgin Australia Holdings Ltd., the nation’s second-largest carrier, dropped 11 percent to 41 Australian cents in Sydney after forecasting that annual profit would slip for the third time in five years.

Of the 475 companies on the MSCI Asia Pacific Index that reported results since the beginning of April and for which estimates are available, 53 percent are exceeded expectations, while 47 percent fell short, according to data compiled by Bloomberg.

Among stocks that advanced, Dai-ichi Life Insurance climbed 7.3 percent to 166,900 yen inTokyo after projecting a 14 percent profit increase and announcing a 100-for-1 stock split.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

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