Asian Stocks Fall as China Enters Bear Market; Sony Declines

Aug. 19 (Bloomberg) -- Asian stocks fell, briefly dragging China’s key index into a so-called bear market, as Maanshan Iron & Steel Co. reported losses and shipping rates slumped.

Maanshan Steel, China’s No. 4 listed steelmaker, lost 7.5 percent, while China Cosco Holdings Ltd., the world’s largest operator of dry-bulk ships, slumped 7.4 percent in Shanghai. Tokio Marine Holdings Inc. dropped 2 percent after Japanese regulators said new guidelines will hurt insurers’ solvency ratios. Sony Corp. sank 3.9 percent after cutting the price of its PlayStation 3 game player.

The MSCI Asia Pacific Index fell 0.7 percent to 109.89 as of 5:33 p.m. in Tokyo, erasing an earlier gain of 0.6 percent. The gauge has rallied 56 percent from a more than five-year low on March 9 amid speculation the global economy is recovering.

“We may need to see a healthy pullback,” said Daphne Roth, Singapore-based head of Asian equity research at ABN Amro Private Banking, which oversees about $14 billion. “Investors are still waiting for better entry levels.”

Japan’s Nikkei 225 Stock Average lost 0.8 percent to 10,204, while Hong Kong’s Hang Seng Index sank 1.7 percent. China’s Shanghai Composite Index dropped 4.3 percent, taking its drop from this year’s high on Aug. 4 to 19.8 percent. That’s just short of the 20 percent level that signals a bear market.

Among stocks that rose today, Honda Motor Co. added 2 percent after Nomura Holdings Inc. upgraded Japan’s auto industry. Qantas Airways Ltd., Australia’s biggest airline, advanced 3.5 percent as it signaled improving passenger volumes.

Home Depot, Target

Futures on the Standard & Poor’s 500 Index lost 1 percent. The U.S. gauge rose 1.1 percent yesterday, aided by better-than- estimated earnings at Home Depot Inc. and Target Corp.

A third of the 508 companies in the MSCI Asia Pacific Index that have reported results since early July have beaten analysts’ profit estimates, while 18 percent have missed, according to data compiled by Bloomberg.

“The earnings season has been surprising,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which manages about $95 billion. “It’s given investors confidence the recovery is coming through and that valuations will be supported by strong earnings. Still, markets have rallied a long way and are vulnerable to bad news.”

Maanshan Steel dropped 7.5 percent to 4.81 yuan in Shanghai. The company posted a half-year loss for the second consecutive period as the global recession crimped demand from homebuilders and automakers.

Declines in China

China Everbright Securities Co., which started trading yesterday and posted the smallest first-day gain of any new stock in Shanghai this year, slumped 10 percent to 24.66 yuan.

The Shanghai Composite has dropped this month as a plunge in bank loans, disappointing earnings and concern the government will seek to damp property speculation hurt confidence.

“It’s irrational selling that has shattered market confidence,” said Larry Wan, Shanghai-based deputy chief investment officer at KBC-Goldstate Fund Management Co., which oversees about $583 million in assets. “Some mutual funds have been reducing their stock holdings as they are pessimistic about the economic outlook.”

Shipping stocks declined after the Baltic Dry Index, which measures the cost of shipping commodities, sank 2.5 percent in London yesterday, the biggest drop in a week

China Cosco Holdings slumped 7.4 percent to 13.82 yuan. STX Pan Ocean Co. Ltd., South Korea’s biggest bulk carrier, dipped 4.5 percent to 11,750 won in Seoul. Mitsui O.S.K. Lines Ltd., the world’s largest operator of iron-ore vessels, slipped 2.2 percent to 568 yen in Tokyo.

Solvency Ratios

Finance companies were the biggest drag on the MSCI Asia Pacific Index. Tokio Marine, Japan’s largest publicly traded insurer, lost 2 percent to 2,650 yen. T&D Holdings Inc., the second-biggest, dropped 1.2 percent to 2,845 yen.

Japan’s financial regulator said yesterday that solvency ratios at almost all insurers will probably fall once a new standard takes effect. The measure, which will affect how companies calculate their ability to pay claims, is under review and expected to be released by June.

Sony sank 3.9 percent to 2,500 yen. The company cut the price of its PlayStation 3 console by 25 percent, bowing to demands from game publishers and increasing the pressure on industry leader Nintendo Co. to follow. Nintendo lost 0.5 percent to 24,480 yen.

Japanese automakers rose after Shotaro Noguchi, an analyst at Nomura in Tokyo raised his stance on the industry to “bullish” from “neutral.” The companies are likely to see a recovery in demand in developed nations due to government subsidies, which may lead them to raise their forecasts, Noguchi wrote in a report.

Valuation Concern

Honda Motor Co., which makes 51 percent of its revenue in North America, climbed 2 percent to 3,070 yen. Nissan Motor Co., Japan’s No. 3 automaker, added 0.7 percent to 706 yen.

The MSCI Asia Pacific Index rally since March has lifted the average valuation of shares in the gauge to 24 times estimated earnings, compared with 17 times for the S&P 500 and 14 times for the Dow Jones Stoxx 600 Index in Europe.

Signs the economic recovery may fall short of expectations have triggered valuation concerns. Reports last week showed Chinese exports dropped in July and investment growth slowed, while Australia’s statistics bureau said wage growth stalled last quarter as the worst global slump since the Great Depression drove up unemployment.

Qantas surged 3.5 percent to A$2.69. The company said there are signs passenger volumes are improving and yields are stabilizing after reporting its first loss in six years.

Woodside Petroleum Ltd., Australia’s second-biggest oil and gas producer, gained 3.7 percent to A$44.28. The company said first-half profit fell 12 percent to A$898 million ($743 million) from a year earlier on lower oil prices. That compares with the market consensus of A$878 million cited by UBS AG.