Asian Stocks Fall on Valuation Concerns

Monday, June 15, 2009


Asian stocks declined as the three- month, 47 percent rally in the MSCI Asia Pacific Index raised investor concerns that equities are too expensive relative to earnings prospects.

Sumitomo Mitsui Financial Group Inc., Japan’s second- biggest bank by value, sank 6.4 percent on speculation a share sale will dilute existing holdings. Fortescue Metals Group Ltd., Australia’s No. 3 iron ore exporter, slumped 7 percent as Metal Bulletin reported prices for the raw material fell last week. Malaysian Airline System Bhd. fell 3.7 percent after posting a quarterly loss.

“We’re still in the midst of the worst global recession in the post-war period,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which manages about $95 billion. “It’s inevitable that aftershocks will keep coming through.”

The MSCI Asia Pacific Index lost 1.2 percent to 103.88 as of 1:27 p.m. in Tokyo, after ending last week at its highest level since Oct. 2. Japan’s Nikkei 225 Stock Average fell 0.7 percent, while Hong Kong’s Hang Seng Index declined 1.5 percent. Taiwan’s Taiex Index slumped 3.7 percent, the most in Asia today.

Singapore’s Straits Times Index sank 1.6 percent after the government reported the city’s employers had fired more workers last quarter than initially estimated. Australia’s OZ Minerals Ltd., an Australian mining company, fell 4.3 percent as Citigroup Inc. downgraded the stock.

Among shares that rose today, Shenzhen Development Bank Co. jumped 6.7 percent after Ping An Insurance (Group) Co. said it plans to buy a stake. Goodman Group, Australia’s biggest industrial real estate investment trust, surged 10 percent after the Australian Financial Review reported China Investment Corp. will take a stake in the company.

‘Signs of Stabilization’

Futures on the Standard & Poor’s 500 Index fell 0.5 percent. The gauge advanced 0.1 percent to a seven-month high on June 12, as Bank of America Corp. rallied on higher profit estimates and investors bought shares of utilities and phone companies. Treasuries rose for a third day today.

MSCI’s Asian gauge has gained 47 percent from a more than five-year low on March 9 amid speculation the global economy is recovering. The Group of Eight finance ministers said after a meeting in Italy at the weekend that they have started pondering how to reverse the emergency steps they took to rescue the global economy as there are “signs of stabilization.”

The three-month stock rally drove the average valuation of companies on MSCI’s Asia Pacific gauge to 1.5 times the book value of assets at the end of last week. That’s the highest since Sept. 26.

Stock Sale

“The rally in the past few months seems to have come too fast,” said Marco Mak, head of research at Tai Fook Securities Ltd. in Hong Kong. “Some companies may also move to raise some cash from the market, and that could also contribute to the consolidation phase.”

Sumitomo Mitsui fell 6.4 percent to 4,070 yen after the Nikkei reported the company may raise more than expected from a previously announced share sale. Kyosuke Hattori, a spokesman for the bank, said the company hadn’t changed the maximum amount of stock it planned to sell.

Asciano Group, an owner of ports and container terminals in Australia, announced plans today to sell at least A$2 billion ($1.6 billion) in shares to repay debt. The stock, which has tripled in the past three months, was halted in Sydney today.

Fortescue slumped 7 percent to A$3.86. Cash prices for iron ore into China, the world’s biggest buyer, dropped 2 percent from a four-month high in the week ended June 12, according to Metal Bulletin prices.

Best Performers

Materials and energy stocks fell today on declines in metal and oil prices. The two groups are the best-performing of the MSCI Asia Pacific Index’s 10 industries in the past month as investors bet demand for raw materials will pick up as the global economy recovers.

BHP Billiton Ltd., the world’s largest mining company and Australia’s biggest oil producer, lost 2.1 percent to A$37.26. Rio Tinto Group, the world’s third-biggest mining company, fell 1.5 percent to A$76.07. Cnooc Ltd., China’s largest offshore oil producer, sank 3.3 percent to HK$10.48 in Hong Kong.

Gold futures dropped 2.2 percent in New York on June 12, while copper slid 2.9 percent. Oil fell 1.1 percent in after- hours trading, adding to the previous trading day’s 0.9 percent decline.

OZ Minerals declined 4.3 percent to A$1 as Citigroup Inc. cut the company’s stock rating to “sell” from “hold,” citing risks associated with the startup of a mine.

National Carrier

Utility stocks, the worst performers in this year’s global rally, was one of only two groups that rose today on the MSCI Asia Pacific Index. Utilities trade at the cheapest levels relative to the MSCI World Index since 2004 after falling 8.6 percent in 2009, according to Bloomberg data.

Malaysian Airline, the country’s national carrier, dipped 3.7 percent to 3.14 ringgit after reporting its first quarterly loss in more than two years on lower passenger traffic and wrong-way bets on the price of fuel. The stock was downgraded to “underperform” from “neutral,” Credit Suisse Group AG said in a report today.

Shenzhen Development Bank gained 6.7 percent to 21.33 yuan after Ping An agreed to pay $3.2 billion for a controlling stake. Ping An, China’s second-largest insurer, gained 0.1 percent to 45.15 yuan following a five-day trading halt.

Goodman Group surged 10 percent to 49.5 Australian cents. The company may announce China Investment Corp. will take a A$500 million ($404 million) stake, the Australian Financial Review reported, without saying where the information came from.


(Bloomberg)