Asian Stocks Post Weekly Decline on Growth, Profit Concerns

May 16 (Bloomberg) -- Asian stocks fell this week as investors sold shares trading at their most expensive valuations in five years on concerns that the economy and corporate profits will take longer than expected to recover.

Hitachi Ltd., Japan’s third largest chipmaker, tumbled 17 percent after forecasting a loss. Rio Tinto Group, the world’s third-largest mining company, slumped 14 percent after London’s Telegraph newspaper reported the company may sell shares. China Construction Bank Ltd., the world’s No. 2 lender by market value, dropped 8.8 percent as Bank of America Corp. sold a stake.

“All positive news has already been priced,” said Masaru Hamasaki, a senior strategist at Toyota Asset Management Co., which oversees the equivalent of $3.3 billion. “We need solid evidence the economy is indeed recovering to go up any further.”

The MSCI Asia Pacific Index fell 0.7 percent to 97.28 in the past five days, ending a two-week, 9.5 percent advance. Speculation the global economy is recovering sent the gauge to the highest since Oct. 7 on May 11. The average valuation of its companies is 33 times trailing earnings, the highest level since 2004, according to data compiled by Bloomberg.

Japan’s Nikkei 225 Stock Average dropped 1.8 percent, snapping its two-week, 8.3 percent advance. Australia’s S&P/ASX 200 Index slumped 4.3 percent.

Stimulus Measures

The MSCI Asia Pacific Index’s relative strength index, which measures how rapidly prices have risen or fallen, traded above the threshold of 70 that some investors use as a signal to sell in the six trading days through May 13.

“Of course it’s time for a correction, that’s the way markets work,” investor Jim Rogers said in an interview with Bloomberg Television May 12. “I don’t see the stock market as a great place to be for the next two to three years.”

MSCI’s Asian index has climbed 38 percent from a five-year low on March 9 on speculation stimulus measures by governments around the world are working to pull the global economy out its worst recession since World War II.

Mitsubishi UFJ Financial Group Ltd., Japan’s biggest bank, declined 6.3 percent after soaring 23 percent in the past week. Toyota Motor Corp., the world’s biggest automaker, retreated 9.8 percent after saying it will cut production. Santos Ltd., Australia’s third-biggest oil and gas producer, dropped 10 percent following a share sale.

Hopes for an economic recovery faltered this week as government reports showed U.S. retail sales fell 0.4 percent in April and Germany’s economy contracted 3.8 percent in the fourth quarter. Japan’s wholesale prices fell at the fastest pace in 22 years in April, according to central bank figures issued yesterday.

‘Rapid Recovery Unlikely’

“It looks to me now as if the markets are now pricing in a rapid recovery, that they’re pricing in a V-shaped recession, which I consider extremely unlikely,” Nobel Prize-winning economist Paul Krugman said at a forum in Shanghai on May 12. “The market seems to be looking as if this is going to be an average recession, but it’s not.”

Hitachi tumbled 17 percent to 325 yen in Tokyo. The company said on May 12 it will post a net loss of 270 billion yen ($2.78 billion) in the 12 months ending March 31, 2010.

Rio Tinto slumped 14 percent to A$61.88 in Sydney. London’s Telegraph newspaper reported on May 13 that Rio may sell shares to current shareholders if an investment by Aluminum Corp. of China Ltd. is not allowed to proceed. Rio yesterday reaffirmed its commitment to the $19.5 billion transaction.

MSCI Changes

China Construction Bank dropped 8.8 percent to HK$4.79. Bank of America sold 13.509 billion shares, or a 5.78 percent stake, for HK$4.20 apiece, Beijing-based Construction Bank said on May 13.

Mitsubishi UFJ declined 6.4 percent to 613 yen in Tokyo. The stock’s surge the previous week took it to its highest close since Nov. 5.

Toyota Motor retreated 9.8 percent to 3,590 yen. The company said on May 13 it will slash global vehicle production by 28 percent in 2009 to its lowest in seven years as worldwide vehicle demand plummets.

Santos Ltd., Australia’s third-biggest oil and gas producer, dropped 10 percent to A$14.13 in Sydney. The company said on May 13 it raised A$1.75 billion ($1.3 billion) by selling shares to institutional investors. It will sell a further A$1.25 billion to retail investors.