Barefoot Investor: Asia Stocks Fall on Concern European Debt Crisis Will Slow Economic Growth

Asian stocks fell after European policy makers failed to introduce a plan to stem the region’s debt crisis, dimming the earnings outlook for banks, exporters and raw-material producers. BHP Billiton Ltd. (BHP), the world’s biggest mining company, dropped 2 percent in Sydney as crude and metal prices sank. Esprit Holdings Ltd. (330), a clothing retailer with 83 percent of its sales in Europe, tumbled 16 percent in Hong Kong. Asian financial shares slumped, paced by Westpac Banking Corp. in Sydney. Industrial & Commercial Bank of China Ltd. slid 3.4 percent on speculation China won’t loosen measures to control inflation.

Investors were hoping for “a firm, positive response to Europe’s debt crisis,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “Instead, what they got was just greater uncertainty, and nothing was resolved.”

The MSCI Asia Pacific excluding Japan Index fell 2 percent to 406.26 at 12:03 p.m. in Seoul, extending two straight weeks of losses. More than five stocks retreated for each that rose. Markets in Japan are closed today for a public holiday.

South Korea’s Kospi Index slid 0.6 percent and Hong Kong’s Hang Seng Index dropped 2.4 percent. Australia’s S&P/ASX 200 Index lost 1.8 percent, while New Zealand’s NZX 50 Index declined 0.3 percent in Wellington. A report today from Westpac Banking Corp. (WBC) and McDermott Miller Ltd. showed New Zealand consumer confidence was unchanged in the third quarter.
Consumer Confidence

Futures on U.S. Standard & Poor’s 500 Index dropped 1.6 percent today. The gauge advanced for a fifth straight day on Sept. 16, capping a 5.4 percent weekly gain, after a report showed U.S. consumer confidence climbed.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 57.8 this month from 55.7 in August, the report showed. The median estimate of economists surveyed by Bloomberg News called for a reading of 57. The group’s measure of consumer expectations six months from now dropped to the lowest level since May 1980.

Asian stocks fell today after finance chiefs from the euro region said last week that the 18-month debt crisis leaves no room for tax cuts or extra spending to spur an economy on the brink of stagnation. Economic reports on Germany this week are forecast to show a decline in investor confidence and a slowdown in manufacturing in Europe’s largest economy.

Greece’s ability to avoid default hangs in the balance as international monitors assess whether Prime Minister George Papandreou can meet the conditions of rescue loans.
Aid Payment

European Union and International Monetary Fund inspectors will speak with Finance Minister Evangelos Venizelos today to judge whether the government is eligible for its next aid payment, due next month, and on track for a second rescue package approved by EU leaders on July 21.

“The fragility of the Greek position has the potential to threaten the solvency of euro banks, in turn creating added risk for the other highly leveraged European governments,” said Angus Gluskie, who manages more than $300 million at White Funds Management in Sydney.

BHP fell 2 percent to A$37.46 in Sydney. Rio Tinto Group, the world’s second-largest mining company by sales, lost 1.6 percent to A$70.15. Jiangxi Copper Co., China’s No. 1 producer of the metal, lost 4.4 percent to HK$17.84 in Hong Kong and Aluminum Corp. of China Ltd., the listed unit of nation’s biggest maker of the lightweight metal, slumped 1.6 percent to HK$4.39.
Oil, Metals

A measure of primary metals traded in London fell 0.4 percent on Sept. 16, while copper futures for December delivery declined 0.6 percent on the Comex in New York. Today, New York- traded copper sank as much as 2.2 percent. Crude oil for October delivery dropped 1.6 percent on the New York Mercantile Exchange on Sept. 16, and as much as 1.4 percent today.

Asian exporters also fell. Esprit tumbled 16 percent to HK$10.26. Li & Fung Ltd., a supplier of toys and clothes to Wal- Mart Stores Inc., retreated 4.6 percent to HK$13.56. Billabong International Ltd. (BBG), a surfwear maker that gets a fifth of its sales from Europe, fell 4.1 percent to A$3.02 in Sydney.

Westpac dropped 2.7 percent to A$19.39, while in Hong Kong, HSBC Holdings Plc, Europe’s largest bank by market value, lost 2.2 percent to HK$63.20.

The MSCI Asia Pacific ex Japan Index lost 13 percent this year through Sept. 16, compared with a 3.3 percent drop for the S&P 500 and a decline of 17 percent for the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 11.2 times estimated earnings on average, compared with 12.2 times for the S&P 500 and 9.6 times for the Stoxx 600.

China Inflation

Industrial & Commercial Bank slipped 3.4 percent to HK$4.61 in Hong Kong and Belle International Holdings Ltd., a Chinese retailer of women’s shoes, lost 2.4 percent to HK$13.98 after a report showed new-home prices rose in August in all 70 cities monitored by the government for the first time this year.

Prices in Beijing gained 1.9 percent from a year earlier, while those in Shanghai, the nation’s financial center, increased 2.8 percent, the statistics bureau said on its website yesterday.

China Coal Energy Co., a unit of the country’s second- biggest producer of the commodity, plunged 17 percent to HK$8.26 before trading in the stock was suspended in Hong Kong. Its parent, China National Coal Group Corp., was ordered to cease operations in China’s Shanxi province after flooding at a pit killed 10 people, Xinhua News Agency reported Sept. 17, citing provincial Vice Governor Li Xiaopeng.(Bloomberg)


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