Aug. 25 (Bloomberg) -- Asian stocks fell and Treasuries advanced as lower profit at Chinese companies and evidence of increasing loan losses in the U.S. sapped demand for risky assets. South Africa’s rand and the Australian dollar dropped as commodity prices declined.
Jiangxi Copper Co. sank 5.7 percent in Shanghai after posting a 61 percent decline in first-half net income and metals retreated. Aluminum Corp. of China Ltd., which reported its third quarterly net loss, fell 2.7 percent in Hong Kong. Chinese equities posted the region’s worst performance as the nation’s premier warned the economic recovery isn’t stable yet. KB Financial Group Inc. lost 2.9 percent in Seoul as SunTrust Banks Inc. said U.S. lenders face more credit losses.
The MSCI Asia Pacific Index lost 0.4 percent to 112.95 as of 4:11 p.m. in Tokyo. The index rallied 2.5 percent yesterday, the most since May 19. Companies on the gauge are priced at an average 24 times estimated earnings, up from 13.7 times at the end of 2008.
“Companies aren’t yet seeing the signs of improvement coming through, even though the market is anticipating it,” said Matt Riordan, who helps manage about $3.8 billion at Paradice Investment Management in Sydney. “We need to start seeing some pretty broad profit upgrades coming through driven by revenues rather than cost cutting. Until then, we’ll be cautious.”
China’s Shanghai Composite Index sank 2.6 percent after the Wen Jiabao, the nation’s premier, said yesterday that excess industrial capacity may limit growth and authorities can’t be “blindly” optimistic. Japan’s Nikkei 225 Stock Average slipped 0.8 percent. Hong Kong’s Hang Seng Index lost 1.1 percent.
NGK, Woolworths
Among stocks that gained today, NGK Insulators Ltd. rallied 3.7 percent in Tokyo after the Nikkei newspaper said the company won an order from Abu Dhabi. Australia’s Woolworths Ltd., the country’s biggest retailer, rose 2.2 percent on plans for a joint venture with U.S. home-improvement chain Lowe’s Cos.
Futures on the Standard & Poor’s 500 Index lost 0.2 percent. The U.S. gauge dropped 0.1 percent yesterday, erasing an earlier 0.9 percent advance, following SunTrust’s comments. Taylor, Bean & Whitaker Mortgage Corp., the 12th-largest U.S. mortgage lender, also filed for bankruptcy protection, while Fitch Ratings said more delinquent U.S. mortgage holders are failing to catch up with their payments.
Treasuries rose for a second day amid speculation the global financial crisis won’t end this year. The yield on the 10-year note declined two basis points to 3.46 percent, according to data compiled by Bloomberg.
Fading Momentum?
“I’m favoring longer maturities,” said Hideo Shimomura, who oversees $4 billion in non-yen bonds as chief fund investor in Tokyo at Mitsubishi UFJ Asset Management Co., a unit of Japan’s largest bank. “Looking toward next year, the momentum in the economy will fade. The trend for inflation is down.”
Jiangxi Copper, China’s biggest producer of the metal, sank 5.7 percent to 37.20 yuan after saying first-half profit slumped 61 percent because of lower prices.
Copper futures in New York sank 1.4 percent in after-hours trading, following yesterday’s 1.3 percent gain. Oil prices lost 1 percent, erasing yesterday’s advance.
South Africa’s rand lost 0.5 percent versus the dollar today, while the Australian dollar fell 0.4 percent. The two currencies have moved along with the Reuters/Jefferies CRB Index of 19 raw materials about 90 percent of the time this year, Bloomberg data show. The commodities gauge, which hasn’t yet traded today, rose 0.8 percent yesterday.
‘Cautious’ Investors
“We’re not out of the woods on a global recovery basis so, though things look better, investors are being cautious,” said Phil Burke, chief foreign-exchange dealer at JPMorgan Chase Bank in Sydney.
Aluminum Corp., known as Chalco, lost 2.7 percent to HK$8.96. The company aims to break even or at least curb losses in the second half on expectations of an improvement in the market, Chairman Xiong Weiping said at a news conference today.
About 18 percent of the 538 companies in the MSCI Asia Pacific Index that posted results since early July have missed analysts’ profit estimates, according to data compiled by Bloomberg. A third of those companies have reported better-than- estimated earnings, helping drive the stock index to the highest level in almost 11 months on Aug. 14.
“The market is no longer cheap,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which manages about $75 billion. “The question is whether the rally is justified by the pick-up in economic data and earnings.”
Empty Shelves
Wesfarmers Ltd. slumped 3.5 percent to A$24.80. Australia’s second-largest retailer is stocking more fresh fruit and vegetables than it can sell to reverse the reputation its Coles supermarket division has for empty shelves and win market share, CEO Richard Goyder said in an interview.
KB Financial retreated 2.9 percent to 54,400 won following comments from James Wells III, chief executive officer of Atlanta-based SunTrust. Mizuho Financial Group Inc., Japan’s third-biggest bank by market value, slipped 1.8 percent to 225 yen. Daiwa Securities Group Inc. Japan’s second-largest brokerage, fell 3.2 percent to 551 yen.
“This credit cycle has yet to play itself out,” Wells said in a speech to the Rotary Club of Atlanta. “We do not expect things to improve for the banking industry in the very near future.”
China Construction Bank Corp. fell 4.3 percent to 5.53 yuan in Shanghai. Chairman Guo Shuqing said yesterday “excess liquidity” from explosive loan growth in the first half of the year has led to asset bubbles.
Credit Losses
Global credit losses and writedowns by financial institutions have totaled $1.6 trillion since 2007, according to data compiled by Bloomberg. The financial crisis helped drag the U.S. and Japan into recession and caused the collapse of Lehman Brothers Holdings Inc. and Bear Stearns Cos.
Nouriel Roubini, the New York University professor who predicted the financial crisis, wrote in the Financial Times yesterday the chance of a double-dip recession is increasing because of risks related to ending global monetary and fiscal stimulus.
Suncorp-Metway Ltd., Australia’s third-largest insurer, sank 2.8 percent to A$7.58. Net income in the 12 months ended June 30 fell 40 percent to A$348 million ($291 million) as the company set aside more money to cover bad debt. Impairment losses on loans soared 10-fold to A$710 million.
NGK climbed 3.7 percent to 2,270 yen. The company won a 60 billion yen ($639 million) order from Abu Dhabi to supply rechargeable batteries for power management systems, the Nikkei newspaper reported.
Woolworths rose 2.2 percent to A$28.63. The company said it will start a joint venture with North Carolina-based Lowe’s and open more than 150 stores over the next five years.
South Korea’s Daewoo Engineering & Construction Co. surged 9.2 percent to 14,800 won after Edaily reported Blackstone Group LP, KKR & Co. and Permira Holdings Ltd. may bid for the company.
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