LM:Asian stocks drop as investors watch US debt limit, shutdown
Tokyo: Asian stocks fell, with the regional benchmark index extending last week’s drop, as US lawmakers wrangled over the debt limit and partial government shutdown.
Blumont Group Ltd and Asiasons Capital Ltd each fell by a record on resuming trading after Singapore Exchange Ltd imposed restrictions on investors in the stocks. Sun Hung Kai Properties Ltd declined 2.6% on a report the developer offered to sell units at a Hong Kong residential project at a discount. Sharp Corp. sank 8.2%, falling the most on the regional equity benchmark, after last month saying it may price a share sale as early as Monday.
The MSCI Asia Pacific Index fell 0.8% to 137.95 as of 7.45pm in Tokyo, with all but one of its 10 industry groups dropping. The gauge lost 1.2% last week, the first weekly drop in more than a month, as the partial US government shutdown stoked concern lawmakers won’t be able to agree on raising the nation’s $16.7 trillion borrowing limit this month.
“The US situation is clearly abnormal and the uncertainty doesn’t make things easier for investors in risk assets,” said Masaru Hamasaki, a senior strategist at Tokyo- based Sumitomo Mitsui Asset Management Co., which oversees about 11.2 trillion yen ($115 billion) in assets. “If the US defaults and misses paying its bills even just for a few days, the market will turn chaotic.”
US speaker John Boehner said on Sunday the House can’t pass an increase to the debt ceiling without packaging it with other provisions—a non-starter for President Barack Obama, whose healthcare law has been the target of defunding efforts by Republicans.
Regional gauges
Japan’s Topix index fell 1.4%, retreating for a seventh day to extend the longest losing streak since July 2012. South Korea’s Kospi index lost 0.1%. New Zealand’s NZX 50 Index slid 0.1%. In Australia, where many businesses are closed for Labour Day, the S&P/ASX 200 Index fell 0.9% on trading volume about half the 30-day average.
Hong Kong’s Hang Seng Index slipped 0.7%. Singapore’s Straits Times Index slid less than 0.1% and Taiwan’s Taiex index lost 0.4%. Financial markets in China are closed for a holiday on Monday.
Futures on the Standard and Poor’s 500 Index slumped 0.9% on Monday. The gauge dropped for a second week last week as the first partial government shutdown in 17 years began.
Default risk
Treasury secretary Jacob J. Lew said Congress needs to pass a debt-ceiling increase by 17 October or the US will risk defaulting on its payments. Federal Reserve Bank of San Francisco president John Williams estimated a two-week government halt would shave 0.25 percentage point off fourth-quarter economic growth.
The shutdown delayed the release of the labour department’s monthly payrolls report, which was due 4 October.
“Markets need to be aware that the impasse on Capitol Hill is far from being resolved,” Evan Lucas, Melbourne-based market strategist at IG Ltd said in a note on Monday. “The shutdown stalemate continues to ebb and flow and is disruptive.”
The MSCI Asia Pacific Index traded at 13.3 times estimated earnings on Monday, compared with 15.2 for the S&P 500 and 14 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
Blumont and Asiasons resumed trading after the commodity investors were suspended 4 October as their shares plunged. Singapore’s bourse is prohibiting selling the companies’ stock unless investors hold an equal quantity of equity and settle the transactions in cash. Blumont had soared more than 1,000% this year through September, prompting the SGX to investigate.
Blumont plunges
Blumont on Monday slumped 85% to 13 Singapore cents, extending a 56% decline on 4 October. The plunge also prompted the company to scrap a deal to buy Australia’s Cokal Ltd for S$146 million. Asiasons, which last month bought a stake in US-based oil and gas producer Black Elk Energy Offshore Operations Llc, sank 86% to 15 Singapore cents, widening a 61% plunge on 4 October.
Sun Hung Kai lost 2.6% to HK$102.40 after the Hong Kong Economic Journal reported it offered to sell some units at a residential project at about 30% discount, the biggest price cut since the city’s latest rule on new-flat sales became effective.
Sharp slumped 8.2% to 291 yen. The stock, which has fallen 20% over the six-day period, fell the most on the 1,002-member MSCI Asia Pacific measure on Monday. The loss-making TV manufacturer said 18 September it may price shares as early as Monday to fund capital expenditure. The company said after Japan’s markets closed that it would offer shares at 279 yen each to raise as much as 136.5 billion yen.
Tokyo Electric Power Co., the owner of the crippled Fukushima Dai-Ichi nuclear power plant, sank 7.6% to 488 yen, leading a decline among utilities. Bloomberg
