22 Oct 2009
Oct. 22 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index to its biggest loss in three weeks, after China's economy grew at the fastest pace in a year, sparking concern the central bank will tighten monetary policies.Bank of Communications Corp. sank 2.6 percent in Hong Kong as China's statistics bureau said inflationary expectations are rising in an economy that grew 8.9 percent in the third quarter. Sumitomo Mitsui Financial Group Inc. lost 3.3 percent in Tokyo after U.S. analyst Dick Bove downgraded Wells Fargo & Co. on concern loan losses may be accelerating. LG Electronics Inc. fell 5 percent in Seoul after Credit Suisse Group AG cut its share-price target.
The MSCI Asia Pacific Index lost 1.4 percent to 118.89 as of 1:27 p.m. in Tokyo, the biggest decline since Oct. 2. The gauge has climbed 68 percent from a five-year low on March 9 on signs the global economy is recovering from the worst slowdown since World War II.
"China faces increasing pressure to tighten monetary policy as economic growth accelerates," said Monika Yang, who helps oversee $10 billion at Hamon Asset Management Ltd. in Hong Kong. "That's the biggest concern among investors."
Japan's Nikkei 225 Stock Average slid 1.4 percent as a government report showed the country's exports slumped 30.7 percent in September. South Korea's Kospi Index declined 0.1 percent, while Taiwan's Taiex Index dropped 1.2 percent.
Esprit, Datang Power
Hong Kong's Hang Seng Index sank 1.1 percent, while China's Shanghai Composite Index lost 0.1 percent. Esprit Holdings Ltd., the biggest Hong Kong-traded clothier, slid 2.6 percent, after saying first-quarter sales dropped. Datang International Power Generation Co., China's second-biggest electricity producer, dropped 1.9 percent after posting worst-than-expected profit.
Futures on the U.S. Standard & Poor's 500 Index lost 0.2 percent. The gauge fell 0.9 percent yesterday, the most since Oct. 1 even after Wells Fargo posted a record quarterly profit. Bove, an analyst at Rochdale Securities LLC, cut the stock to "sell" and said accelerating loan losses were "disturbing."
Bank of Communications lost 2.7 percent to HK$9.98. China Unicom Ltd., the nation's second-biggest mobile-phone operator, slumped 3.1 percent to HK$10.64.
China's economy grew less in the third quarter than the 9 percent expected by economists in a Bloomberg News survey. Still, separate reports showed industrial production and retail sales grew at a faster pace in September.
Inflationary expectations are increasing in China as prices rise month-on-month, statistics bureau spokesman Li Xiaochao said at a press briefing in Beijing today.
Target Price
Tightening is "inevitable in the mid term," said Gabriel Gondard, Shanghai-based deputy chief investment officer at Fortune SGAM Fund Management Co., which oversees about $7.2 billion in assets.
LG Electronics, the world's No. 2 maker of liquid-crystal- display televisions, fell 5 percent to 114,500 won in Seoul. Credit Suisse cut its price target by 9.1 percent to 110,000 won, citing a possible increase in research and development costs for its mobile-phone business.
Finance companies on the MSCI Asia Pacific Index accounted for 33 percent of the gauge's decline today amid loan-loss concerns. Sumitomo Mitsui, Japan's second-largest bank by market value, slumped 3.3 percent to 3,200 yen. Mitsubishi UFJ Financial Group Inc., Japan's biggest publicly traded bank, dropped 3.1 percent to 472 yen.
The MSCI index has surged 35 percent this year, outpacing gains by the S&P 500 and Europe's Dow Jones Stoxx 600 Index. Companies in the Asian benchmark trade at 1.6 times book value, near the highest level since September 2008.
‘Too Optimistic'
"Investors have become too optimistic," said Tomokatsu Mori, an equities manager at Fukoku Mutual Life Insurance Co., which manages about $61 billion in assets. "There's simply too much production capacity out there that's not going to be coming back on-line, and without that happening the economy can't spring back to life. How can stocks go up if that's the case?"
In Hong Kong, Esprit declined 2.6 percent to HK$53.55 after saying first-quarter sales fell 8 percent to HK$9.37 billion ($1.21 billion). Li & Fung Ltd., which supplies clothes and toys to Wal-Mart Stores Inc., fell 3.4 percent to HK$34.45.
Datang International Power lost 1.9 percent to HK$4.11. The company posted net income of 374.2 million yuan ($55 million) in the third quarter, compared with a loss of 432.9 million yuan a year ago. That's lower than a median estimate of 578 million yuan in a Bloomberg analyst survey.
