Barefoot Investor: Asian Stocks Fall as Metals Drop on Europe Debt Concern, China Bad Loans

Asian stocks fell, heading for a third week of losses, while metals dropped and the South Korean won weakened as Europe’s debt crisis spread and concern mounted that bad loans in China increased.

The MSCI Asia Pacific Index fell 1.5 percent as of 12:17 p.m. in Tokyo, reaching the lowest level in almost six weeks. Standard & Poor’s 500 Index futures were little changed after the U.S. equity benchmark sank 1.7 percent yesterday. Copper lost 0.5 percent and nickel and zinc fell more than 1 percent. The won declined 0.6 percent to 1,136.70 per dollar. Oil, which slid below $100 a barrel yesterday, sank 0.1 percent to $98.71.

“The fear is that Europe is deep in recession,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “That will make the debt situation worse.”

Investors drove up the funding costs of France and Spain as the countries sold 11.6 billion euros ($15.6 billion) of debt yesterday. The China Banking Regulatory Commission told lenders last week that loans to property developers are likely to sour as sales slow, said a person with knowledge of the matter who declined to be identified because the instructions were private.

Growth in Southeast Asian economies may have peaked last quarter as the European debt crisis and Thai floods hurt the outlook for exports. Malaysia’s gross domestic product increased 4.8 percent in the three months through September from a year earlier, after a 4 percent expansion the previous quarter, based on the median of 25 estimates from a Bloomberg News survey taken before a central bank’s report today.
Nikkei, Kospi

S&P 500 futures rose less than 0.1 percent to 1,215.20. The U.S. stock gauge has lost 3.8 percent in the past four days and closed yesterday at the lowest level in a month.

About five stocks fell for each that rose on the MSCI Asia Pacific Index. Japan’s Nikkei 225 Stock Average lost 1.3 percent, South Korea’s Kospi tumbled 2.1 percent and Hong Kong’s Hang Seng Index retreated 1.8 percent.

China Vanke Co., the nation’s biggest listed property developer, sank 4.5 percent in Shenzhen, southern China. Evergrande Real Estate Group Ltd. (3333) and Agile Property Holdings Ltd. fell more than 2 percent in Hong Kong. China’s banking regulator said banks should cut “high-risk” loans to developers, the person with knowledge of the instructions said.

China’s home prices fell in 33 of 70 cities monitored by the government in October, the statistics bureau reported today. That’s the worst performance since the government expanded property curbs and scrapped the reporting of its national average housing data this year.
Greek Bailout

Debt in the property industry is “certainly something Chinese authorities need to focus on, but the information I have tells me that it’s an issue that government will be able to control and they have enough ability to withstand the size of defaults,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion.

The euro was within 0.2 percent of a five-week low versus the yen as discussions progressed between Greece’s government and banks on terms of a voluntary debt swap that is part of the country’s international bailout. The 17-nation currency traded at $1.3465 from $1.3458 yesterday in New York and has declined 2.1 percent this week.

German Chancellor Angela Merkel rejected yesterday French calls to deploy the European Central Bank as a crisis backstop, defying global leaders and investors calling for more urgent action to halt the turmoil. Merkel listed using the ECB as lender of last resort alongside joint euro-area bonds and a “snappy debt cut” as proposals that won’t work.
Most Bearish

Copper dropped 0.5 percent to $7,492.50 a metric ton, having fallen as much as 2.1 percent today. The metal is set for a 1.8 percent decline this week, the third weekly drop. Zinc weakened 1.2 percent to $1,903.25 a ton and nickel slipped 1.9 percent to $17,801.

Copper traders and analysts are the most bearish in almost two months because of mounting concern that Europe’s debt crisis will curb demand in the region that accounts for about 19 percent of global consumption. Eleven of 23 surveyed by Bloomberg expect the metal to decline, the second consecutive week that their outlook worsened and the highest proportion since Sept. 23.

The cost of protecting corporate and sovereign bonds from default in the Asia-Pacific region rose, according to traders of credit-default swaps. The Markit iTraxx Japan index increased 6 basis points to 192, Deutsche Bank AG prices show. That would be its highest close since Oct. 26, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. (Bloomberg)


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