BLBG: Asian Stocks Fall as Commodity Producers, Automakers Decline
Asian stocks dropped, sending the benchmark index down the most in a month, as falling metal and oil prices dragged on commodity producers and a higher yen dimmed profit outlooks for Japanese exporters of cars and electronics.
Rio Tinto Ltd., the world’s third-largest mining company, lost 3.3 percent in Sydney, while Inpex Corp. Japan’s biggest energy explorer, slid 8.2 percent. Honda Motor Co., which generated more than half its profit from North America last year, sank 6.2 percent. Sony Corp. slumped 8 percent after the Nikkei newspaper said the company will record an annual operating loss.
“We’re bracing for some very choppy markets,” said Karma Wilson, Sydney-based head of Asian equities at AMP Capital Investors, which manages about $61 billion. “It’s going to be an extremely difficult earnings period. People are expecting it to be bad, but there will always be surprises.”
The MSCI Asia Pacific Index fell 2.8 percent to 86.60 as of 2:44 p.m. in Tokyo, the biggest drop since Dec. 12 and declining for a fourth day. The measure has lost 3.3 percent in 2009, extending last year’s 43 percent slump, as the global recession curbed demand for the region’s raw materials, automobiles and computers.
Japan’s Nikkei 225 Stock Average sank 4.5 percent to 8,443.57, the region’s biggest decline. The nation’s markets were closed yesterday for a holiday, when the MSCI AC Asia Pacific excluding Japan Index lost 3.2 percent. Corporate bankruptcies rose for a seventh month in December, Tokyo Shoko Research Ltd. said today.
The yen gained against the dollar to the strongest level since Dec. 19, reducing the value of repatriated funds from sales generated overseas. Standard & Poor’s 500 Index futures added 0.6 percent recently.
Exports Decline
China’s CSI 300 Index retreated 1.8 percent, extending losses after a government report showed exports fell 2.8 percent in December, the biggest drop in almost a decade. Most other Asian markets declined. Infosys Technologies Ltd. led gains in India after quarterly profit climbed.
Analysts have slashed their earnings estimates for companies included in MSCI’s Asian index by 39 percent since a peak in April, according to data compiled by Bloomberg.
“It’s not very wise to increase the equity portion of portfolios because we aren’t sure if the worst is over or not,” said Yuuki Sakurai, general manager of financial and investment planning in Tokyo at Fukoku Mutual Life Insurance Co., which oversees the equivalent of $54 billion in assets. “This year could be the worst of the current downturn in terms of the economy and profits.”
Commodity Producers
Rio fell 3.3 percent to A$39.94. The miner suspended the expansion of a copper mine because of declining prices. Mitsui & Co., Japan’s second-largest trading company and which generates more than half its profits from commodities dealing, plunged 8.8 percent to 902 yen. Jiangxi Copper Co., China’s second-biggest producer of the metal, lost 3.5 percent to 12.27 yuan.
A measure of six metals traded in London dived 4.9 percent, the most in more than a month.
Inpex lost 8.2 percent to 642,000 yen. Woodside Petroleum Ltd., Australia’s second-biggest oil and gas producer, slid 2.8 percent to A$34.69.
Oil for February delivery fell 7.9 percent to $37.59 a barrel in New York yesterday, capping a five-day, 23 percent slump. Crude dropped on concern production cuts by the Organization of Petroleum Exporting Countries will fail to offset a slump in demand.
Alumina Ltd. tumbled 6.3 percent to A$1.43 after partner Alcoa Inc., the largest U.S. aluminum producer, exceeded analyst estimates with its first quarterly net loss in six years.
Honda, Toyota
Honda lost 6.2 percent to 1,951 yen. Isuzu Motors Ltd., Japan’s third-biggest maker of commercial vehicles, tumbled 8.5 percent to 130 yen. Toyota Motor Corp., which is forecasting its first operating loss in history, fell 6 percent.
The yen traded at 89.39 against the dollar after touching 88.88 yesterday, the strongest since Dec. 19. Carmakers have slashed profit forecasts on plunging global demand and the surging yen.
Sony slumped 8 percent to 2,020 yen. The world’s second- biggest maker of consumer electronics will likely post an operating loss of about 100 billion yen ($1.12 billion) this year, its first in 14 years, due to the stronger yen and slumping demand for electronics such as televisions, the Nikkei newspaper reported. Analysts surveyed by Bloomberg forecast a 35 billion yen operating profit.
Toshiba Corp. declined 8.1 percent to 387 yen. The world’s second-biggest maker of flash memory chips will swing to an operating loss of 200 billion yen for the year ending in March because of its memory business, the Nikkei said.
‘Gloomy Outlooks’
“Given that Sony and Toyota are coming out with gloomy outlooks, we expect more major companies to do the same,” said Mitsushige Akino, chief investment officer who oversees about $430 million at Tokyo-based Ichiyoshi Investment Management Co. “We have yet to see significant dividend cuts, but once companies do that, it will weigh heavily on markets.”
Shenzhen Development Bank Co., controlled by U.S. buyout firm TPG Inc., slumped 4 percent to 9.47 yuan after saying 2008 profit may have dropped 77 percent as it set aside more provisions against bad loans.
Japan’s real estate developers slumped after Creed Corp., a property manager, filed for bankruptcy on Jan. 9 with 65.1 billion yen in debt. Creed, which had tried to rehabilitate itself through asset sales and job cuts, was poised to drop by its 2,000 yen daily limit to 11,790 yen.
Mitsubishi Estate Co., Japan’s biggest property developer by market value, retreated 9.8 percent to 1,283 yen. Mitsui Fudosan Co., Japan’s second largest by value, lost 8.2 percent to 1,287 yen.
“This bankruptcy will push the market back into ‘flight to quality’ mode as its best means of risk avoidance,” Yoshihiro Hashimoto, an analyst at Merrill Lynch & Co., wrote in a report titled “Creed shock.”
Infosys, India’s second-largest computer-services provider, jumped 2.1 percent to 1,183.7 rupees after third-quarter profit climbed 33 percent as the company won orders from clients seeking to cut costs.
