BLBG: Asian Stocks Decline on Valuations; Yen Falls on Recovery Signs
By Will McSheehy and Jonathan Burgos
March 31 (Bloomberg) -- Asian stocks declined on concern a rally this month has overvalued earnings prospects. The yen weakened as signs the global recovery is gathering steam damped demand for Japan’s currency as a refuge.
The MSCI Asia Pacific Index lost 0.5 percent to 125.23 as of 4 p.m. in Tokyo after climbing 6 percent this month, the most since July’s 8.4 percent gain. The yen headed for a monthly loss versus all 16 of its major counterparts. Standard & Poor’s 500 futures lost 0.3 percent. The Stoxx Europe 600 fell 0.2 percent to 263.40 as of 8 a.m. in London.
“Valuations are about fair following recent gains,” said Daphne Roth, Singapore-based head of Asian equity research at ABN Amro Private Banking, which oversees about $21 billion in the region. “Stocks are not cheap but neither are they expensive. We are still overweight on equities as we believe the global economic recovery is on track.”
Rising stocks, a stabilizing housing market and fewer job losses may be giving U.S. households hope that the recovery from the worst recession since the 1930s will be sustained. The Conference Board’s confidence index rose to 52.5 from 46.4 in February, according to data yesterday from the New York research group. Home prices unexpectedly rose in January for an eighth month, an S&P/Case-Shiller index showed.
A Bank of Japan survey of large manufacturers, due to be published tomorrow, will probably show business confidence improved for a fourth straight quarter. The Tankan index will climb 11 points in March, according to the median forecast of 23 economists surveyed by Bloomberg News.
Yen Weakens
Japan’s currency dropped to 125.13 per euro as in Tokyo from 124.44 yesterday, when it touched 125.46, the weakest since Feb. 4. The yen slipped to 93.185 per dollar from 92.7.
The euro was at $1.3425 per dollar from $1.3414. The European currency has fallen against 14 of its 16 major peers this quarter, including a 6.4 percent decline versus the dollar, amid concern Greece’s debt woes would derail a euro-zone recovery. That would be the currency’s worst performance since an 11 percent drop against the greenback in the three months ended September 2008.
Malaysia’s ringgit and Indonesia’s rupiah were poised for their best monthly advances since at least September, rallying as the world’s fastest economic growth attracts funds to Asia. The region’s developing economies will expand 8.4 percent this year, outpacing growth of 2.7 percent in the U.S. and 1 percent in the euro region, the International Monetary Fund forecasts.
Overseas Investors
The ringgit gained 3.9 percent, Asia’s best performance, as the central bank this month raised its 2010 economic growth forecast for Malaysia to as much as 5.5 percent, from an October estimate of a maximum 3 percent. The rupiah strengthened 2.4 percent as overseas investors pumped $609 million into Indonesian stocks.
“As the global economic outlook improves and investor sentiment becomes normal, money will move from low-yielding nations to high-yielding ones,” said Daisuke Ueno, president of Gaitame.Com Research Institute Ltd. in Tokyo. “The bias is for currencies to rise against the yen as risk sentiment picks up.”
Japan’s Nikkei 225 Stock Average was little changed and Australia’s S&P/ASX 200 Index sank 0.8 percent in Sydney, where government data released today showed retail sales unexpectedly fell in February.
China’s Shanghai Composite Index dropped 0.8 percent, extending the worst quarterly drop since entering a bear market in August last year, on concern faster inflation will curb corporate earnings growth.
Rising Costs
Baoshan Iron & Steel Co., China’s biggest steelmaker, dropped 2.1 percent, widening its loss for the last three months to 18 percent. Bank of China Ltd. declined 1.8 percent, rounding out a 6 percent first-quarter retreat for the financials index.
“The market is worried that corporate earnings growth might peak in the first quarter due to the low base last year and rising costs,” said Wang Zheng, a fund manager at Jingxi Investment Management Co. in Shanghai.
The measure lost 5 percent this year as the central bank twice ordered banks to set aside more money as reserves to slow record lending growth. The Shanghai Composite is set to be the fifth-worst performer among 93 indexes globally tracked by Bloomberg, and the worst quarter since the three months ended Sept. 30, when the gauge tumbled more than 20 percent in August.
Thailand’s SET Index rose 0.8 percent, extending this month’s gain to 10 percent, the best performer in Asia after Mongolia, which isn’t actively traded.
Thai Gains
Overseas investors bought a net 48.6 billion baht of Thai stocks in the past 26 days to yesterday, the longest stretch of net buying in more than five years. Investors bought more stocks as the economy recovered and as anti-government protest didn’t turn violent. Exports, which account for 60 percent of the economy, increased in January by the most since July 2008, official data show.
“Overseas investors have aggressively poured their money into Thai equities this month as economy is on a strong path of recovery and the political concerns abated,” said Songyos Kulvichien, senior executive vice president at Country Group Securities Pcl, Thailand’s second-biggest stock brokerage by trading volume. “Thai shares are also attractive because of its cheap valuation relative to other markets in the region.”
Oil traded little changed above $82 a barrel after rising on signs of increasing U.S. economic growth and as an industry- funded report showed fuel-product supplies declined in the world’s biggest energy consumer.
Crude oil for May delivery was at $82.30 a barrel, down 7 cents, in electronic trading on the New York Mercantile Exchange. The commodity it poised for a 3.7 percent gain in the first quarter after rising 12 percent in the previous three months.
Copper in London has climbed 5.5 percent this quarter, a fifth quarterly increase, reaching $7,878 a ton yesterday, the highest level since August 2008. It lost 1 percent today to $7,770 a ton. Gold for immediate delivery has advanced 0.9 percent in the first three months, a sixth quarterly gain.
To contact the reporters on this story: Will McSheehy in Singapore at wmcsheehy@bloomberg.netJonathan Burgos in Singapore at jburgos4@bloomberg.net
