Asian Stocks Decline for Second Week on Europe, Growth Concerns

By Kana Nishizawa and Adam Haigh - Sep 28, 2012

Asian stocks fell a second week amid concern political discord will prevent Europe from resolving its debt crisis as global growth slows. Losses were limited on speculation China will take new steps to boost the world’s second-largest economy.
Esprit Holdings Ltd. (330), a clothier that counts Europe as its largest market, sank 6.6 percent in Hong Kong after missing earnings estimates. Woongjin Coway Co. (021240) slumped 24 percent in Seoul after the water-purifier maker’s parent filed for bankruptcy protection. United Spirits Ltd. (UNSP) surged about 24 percent in Mumbai after London-based Diageo Plc confirmed it’s in talks to buy the maker of whiskies and brandies.
The MSCI Asia Pacific Index (MXAP) slid 0.8 percent to 122.47 this week, its second-straight weekly loss. The gauge gained 4 percent for the month as central banks from Europe, the U.S., Japan and China took action to support economic growth.
“A period of consolidation in the month ahead looks the more likely outcome,” said George Boubouras, Melbourne-based head of investment strategy at UBS AG’s Australian wealth management unit. The bank oversees about $1.5 trillion. “In Europe, there will continue to be some lingering challenges.”
Stocks on Asia’s benchmark index were valued at about 12.8 times estimated earnings on average, compared with about 13.9 times for the Standard & Poor’s 500 Index and 11.9 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
Japan’s Nikkei 225 Stock Average (NKY) sank 2.6 percent this week as industrial production fell more than economists forecast in August and a territorial dispute between Japan and China intensified. Automakers declined as violent protests against Japanese businesses in China forced production cuts.

Manufacturing Slump

The Bank of Japan’s Tankan report due Oct. 1 is expected to show the nation’s biggest manufacturers grew more pessimistic this quarter as China’s slowdown and Europe’s crisis sapped exports.
China’s Shanghai Composite Index (SHCOMP) added 2.9 percent to 2,086.169 amid expectation the government would offer measures to boost the equities market after the gauge dipped below 2,000. All the index’s gains this week came on Sept. 27 after a Shanghai Securities News report the regulator might introduce measures to buoy stocks.
Hong Kong’s Hang Seng Index (HSI) climbed 0.5 percent, while Taiwan’s Taiex Index decreased 0.5 percent. Australia’s S&P/ASX 200 Index fell 0.5 percent. South Korea’s Kospi Index slid 0.3 percent as the nation’s industrial production fell more than expected in August.

Deadlocked Leaders

Shares slid after German Chancellor Angela Merkel and French President Francois Hollande last weekend clashed on a timetable to introduce joint oversight of the region’s banking sector. Merkel rebuffed Hollande’s appeal to activate it “the earlier, the better,” underlining disagreement between the euro zone’s biggest economies.
Nippon Sheet Glass Co. (5202), which counts Europe as its No. 1 market, declined 6.8 percent to 55 yen in Tokyo. Esprit dropped 6.6 percent to HK$11.92 in Hong Kong after posting full-year profit that missed analyst estimates. Sales in Germany, Esprit’s biggest market, fell 9 percent.
Stocks rebounded yesterday after Spanish Prime Minister Mariano Rajoy’s nine-month-old government announced a fifth austerity budget that may help it meet deficit targets.

Island Fight

Japanese stocks fell the most this week among Asia’s benchmark indexes as a dispute with China escalated over the ownership of uninhabited islands in the East China Sea.
Nissan Motor Co., the top Japanese seller of vehicles in China, slid 5.1 percent this week. The carmaker suspended production in China after anti-Japan protests escalated, with rioters torching showrooms and smashing cars. Toyota Motor Corp. (7203), Asia’s No. 1 automaker, fell 5 percent. Honda Motor Co. declined 7.8 percent.
Woongjin Coway tumbled 24 percent to 30,750 won in Seoul, the steepest weekly drop in the MSCI Asia Pacific Index. The company’s parent applied for court receivership and halted the 1.2 trillion won ($1 billion) sale of a 31 percent stake in Coway to buyout fund MBK Partners Ltd.
PT Bumi Resources (BUMI) dropped 13 percent in Jakarta after Bumi Plc, the London-listed Indonesian coal venture founded by Nathaniel Rothschild, started a probe into alleged irregularities at the company. Relations between Rothschild and Bumi Co-Chairman Indra Bakrie soured last year after the U.K.- based financier urged a “radical cleaning up” of Bumi Resources, which is 29 percent owned by Rothschild’s firm.
United Spirits surged more than 20 percent in Mumbai. Diageo Plc is in talks to buy a stake in the maker of whiskies and other alcoholic beverages, the companies said in a statement.
To contact the reporters on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net; Adam Haigh in Sydney at ahaigh1@bloomberg.net
To contact the editor responsible for this story: John McCluskey at j.mccluskey@bloomberg.net

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