09 Sep 2009
Sept. 9 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index from a one-year high, as Alibaba.com Ltd.'s chairman sold a stake and Lenovo Group Ltd. shareholders including TPG Inc. reduced their holdings.
Alibaba.com, owner of China's biggest electronic-commerce Web site, dropped 5.3 percent in Hong Kong after Chairman Jack Ma sold stock for $35 million. Lenovo, China's biggest maker of personal computers, sank 5.5 percent. Mitsubishi UFJ Financial Group Inc. retreated 2.8 percent in Tokyo after JPMorgan Chase & Co. cut the bank's rating on concern it will need more capital.
The MSCI Asia Pacific Index dropped 0.9 percent to 114.88 as of 2:34 p.m. in Tokyo after closing at the highest level since Sept. 24 yesterday. The gauge has gained 63 percent in the past six months on speculation the global economy is recovering. Stocks on the index are priced at an average 23 times estimated earnings, up from 14 times at the start of the year.
"The conundrum for investors is ascertaining whether market valuations are justified by the underlying macro-economic improvement or not," said Tim Schroeders, who helps manage about $1 billion at Pengana Capital Ltd. in Melbourne. "The added equity issuance in recent days is symptomatic of companies and their corporate advisers taking advantage of increased investor appetite and higher share prices."
Lenovo, China Communications
Japan's Nikkei 225 Stock Average lost 1.3 percent to 10,260.74. South Korea's Kospi index dropped 0.9 percent. Hong Kong's Hang Seng Index fell 1 percent. CSK Holdings Corp. and Metro Pacific Investments Corp. also announced share sales.
China Communications Construction Co., a port builder, slipped 3.4 percent after first-half profit growth missed estimates. In Malaysia, Genting Bhd., Asia's biggest listed casino operator, fell 3.2 percent after Reuters reported the company will issue new shares.
Futures on the U.S. Standard & Poor's 500 Index lost 0.4 percent. The gauge rose 0.9 percent yesterday after metal prices jumped as the dollar weakened and Goldman Sachs Group Inc. boosted its forecasts because of "increasing evidence of a stronger-than-anticipated recovery in global industrial activity."
China's growth accelerated in the second quarter, the government said last month, bringing an end to eight periods of slowing expansion. Industrial production has started to climb in Japan, while a survey released yesterday showed Australian business confidence rose to a six-year high.
Australia's statistics bureau reported declines in retail sales and home-loan approvals today. The country's S&P/ASX 200 Index lost 0.3 percent, erasing an earlier gain of 0.7 percent.
Positive Surprise Needed
"We're seeing signs of an economic recovery but have yet to figure out how long and resilient the recovery will be," said Naoteru Teraoka, who helps oversee about $16 billion at Chuo Mitsui Asset Management Co. "All the catalysts have run out and institutional investors are staying on the sidelines. We need a positive surprise to see a clear trend in the market."
Alibaba slumped 5.3 percent to HK$20.50 after Ma sold 13 million shares at an average price of HK$20.78 apiece. The stock had almost quadrupled this year before today, making it the fifth-best performing member in the MSCI Asia Pacific Information Technology Index.
CSK dropped 6.7 percent to 391 yen after announcing plans to raise about 46 billion yen in a sale of preferred shares. The company also forecast a full-year net loss. Metro Pacific, owner of the Philippines' longest toll road, sank 14 percent to 5 pesos after saying it may raise as much as $345 million in a share sale.
Equity Finance
Genting dropped 3.2 percent to 6.94 ringgit. The company's Singapore unit plans to raise more than $1 billion through a rights offer, Reuters reported.
This year is on pace to be one of the five biggest years globally for equity financing in the last three decades, according to Tsutomu Fujita, chief equity strategist at Citigroup Inc. in Tokyo.
"The sharp rise in the number of large-scale equity finance arrangements is likely to impact equity supply/demand, and therefore overall share prices," Fujita wrote in a report dated Sept. 7.
In Hong Kong, Lenovo fell 5.5 percent to HK$3.46 as shareholders TPG, General Atlantic and Newbridge Asia sold stakes.
In Tokyo, Mitsubishi UFJ fell 3.1 percent to 526 yen, the lowest since April 28, while Sumitomo Mitsui Financial Group Inc. lost 2.7 percent to 3,610 yen. Bank of Yokohama Ltd., Japan's largest regional bank, slumped 3.1 percent to 477 yen.
Bank Downgrades
Katsuhito Sasajima, an analyst at JPMorgan in Tokyo, cut Mitsubishi and Sumitomo Mitsui, Japan's two largest listed banks by value, to "neutral" from "overweight," while Yokohama was slashed to "underweight" from "neutral."
Rising equity issuance is one reason earnings-per-share forecasts have failed to keep pace with the market. Since March, analysts have boosted EPS estimates by 17 percent for companies in the MSCI Asia Pacific, while the gauge has rallied 40 percent.
"The critical question is: What are the earnings underpinning the valuations?" said Macquarie Group Ltd.'s Tanya Branwhite, who was voted Australia's top strategist in a fund manager survey by BRW/East Coles. "Valuations can only be assessed reliably if the earnings underpinning the valuations turn out to be correct."
Rio Tinto Group, the world's third-largest mining company, climbed 0.5 percent to A$58.08. Inpex Corp., Japan's largest oil explorer, climbed 2.8 percent to 762,000 yen.
Gold jumped to as high as $1,009.70 in New York yesterday, a price not seen since March 2008. A gauge of six metals in London climbed 2.4 percent to the highest level since Aug. 13. Crude oil leapt 4.5 percent, the most in three weeks.
China Communications slipped 3.4 percent to HK$9.02. First-half profit missed estimates, even as it rose 38 percent from a year earlier to 3.03 billion yuan, Credit Suisse said in a note today.
