25 Apr 2009
April 25 (Bloomberg) -- A six-week rally in Asian stocks faltered this week, as earnings from companies such as China Mobile Ltd. and KDDI Corp. reduced optimism the global economy is recovering.China Mobile, the world's biggest wireless carrier, sank 6.6 percent in Hong Kong after first-quarter profit grew at the slowest rate in five years. KDDI, Japan's second biggest, lost 6 percent after projecting the slowest earnings growth since 2006. PCCW Ltd., Hong Kong's biggest phone carrier, slumped 16 percent as Chairman Richard Li abandoned his $2.1 billion takeover bid.
"You're seeing cold water being poured on the theme of a sharp rebound in growth," said Tim Schroeders, who helps manage about $1 billion at Pengana Capital Ltd. in Melbourne. "It's encouraging that a bottom has been perceived, but given the likelihood of a protracted period of low growth, some of these share prices ran ahead of reality."
The MSCI Asia Pacific Index slipped 0.2 this week to 89.52, following a 25 percent rally in the previous six weeks. It plunged by a record 43 percent last year as the credit crunch tipped the world's largest economies into recession, forcing companies to cut jobs amid slumping profits.
Japan's Nikkei 225 Stock Average and Hong Kong's Hang Seng Index both declined 2.2 percent. Thailand's SET Index advanced 3.8 percent as Prime Minister Abhisit Vejjajiva ended 12 days of emergency rule in Bangkok, saying the nation has "returned to normal."
China Mobile, KDDI
The gauge had rallied by more than a quarter from a five- year low on March 9 amid signs government measures to ease the financial crisis are working. Earnings estimates for companies included in the MSCI benchmark started to rise this month after a year of declining predictions, data compiled by Bloomberg show.
The average profit estimate is still down 56 percent in the past year, the data show.
China Mobile lost 6.6 percent in the week to HK$69.10. First-quarter net income rose 5.2 percent to 25.2 billion yuan ($3.3 billion), the company said on April 20, the slowest growth rate in five years. The result missed the 26.5 billion yuan median estimate of five analysts in a Bloomberg survey as intensifying competition undermined earnings.
KDDI dropped 6 percent to 440,000 yen after saying operating profit will probably climb 6 percent this year, the weakest growth since 2006.
Stockland plunged 23 percent to A$2.90. The property trust lowered its 2009 earnings forecast, prompting brokerages including JPMorgan Chase & Co. to downgrade the stock.
IMF Growth Forecast
The International Monetary Fund cut its 2009 forecast for the global economy on April 22 to a 1.3 percent contraction, as the impaired health of the financial industry weighs on the rest of the economy. Recovery isn't assured and will depend on policy efforts to cleanse banks' balance sheets and craft measures that spur demand, the IMF said.
"Government measures around the world have succeeded in restoring investor confidence, but that doesn't guarantee a recovery in the global economy," said Kiyoshi Ishigane , a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $61 billion. "The rebound in stocks recently is unlikely to develop into a sustainable, long-term trend."
PCCW slumped 16 percent to HK$3.46 after Hong Kong's Court of App of Appeals blocked Chairman Li's buyout bid.
IHI Corp., a Japanese maker of turbochargers and ships, rallied 17 percent to 153 yen. The company pared its loss estimate for the year ended March 31 for the second time in three weeks as cost cuts and a weaker-than-expected yen boosted earnings.
Pioneer Corp., which makes car audio and navigation systems, soared 30 percent to 371 yen after the Nikkei newspaper said Japan's government may provide funds to the company. Honda Motor Co. also said it's considering an investment in Pioneer.
