Asian Stocks Post Biggest Drop in Three Weeks on Japan Concerns

Nov. 21 (Bloomberg) -- Asian stocks fell this week, dragging the MSCI Asia Pacific Index to its biggest weekly decline in three amid Japanese share sales, while companies including Sony Corp. fueled profit concerns.

Mitsubishi UFJ Financial Group Inc. sank 7.3 percent after announcing Japan’s biggest public sale of additional common shares. Hitachi Ltd., the Nikkei 225 Stock Average’s fourth- largest company by sales, plunged 14 percent after revealing its plan to sell securities. Sony Corp., which makes the PlayStation 3 game console and Bravia televisions, slid 5.5 percent as it pushed back profitability targets.

“What you’re seeing is very much Japan-related,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which holds $75 billion in assets. “Everywhere else in Asia you have a very strong growth profile, but Japan has a lot of long-term structural issues that still need to be tackled.”

The MSCI Asia Pacific Index fell 1.2 percent to 116.91 this week, the steepest weekly retreat since the five days to Oct. 30. Seven of the 10 heaviest drags on the gauge were Japanese shares, including Mitsubishi UFJ.

Japan’s Topix index slid 3.2 percent, extending its drop to a fourth week. The gauge has fallen 2.4 percent in 2009, making it the only loser among the world’s 10 biggest stock markets, according to data compiled by Bloomberg.

The Kospi Index jumped 3.1 percent, breaking a five-week losing streak. Samsung Electronics Co., the world’s largest television maker, soared 5.7 percent after lifting its full-year TV shipment target. Lihir Gold Ltd. jumped 6.6 percent in Sydney, pacing gains among miners of the precious metal, after bullion climbed to a record.

China’s Growth

The S&P/ASX 200 Index fell 0.4 percent in Sydney. Hong Kong’s Hang Seng Index declined 0.4 percent, having closed at a level in the week that was double its March 9 low. The Shanghai Composite Index climbed 3.8 percent as the Ministry of Commerce’s Yao Jian said consumer spending will become an “important engine” for growth.

Expectations for more robust growth in emerging economies including China have overshadowed concerns about Japan’s recovery, driving up Asian equities faster than other regions. The MSCI Asia Pacific Index has risen 31 percent in 2009, compared with a 21 percent gain by the Standard & Poor’s 500 Index in the U.S. and a 23 percent climb by Europe’s Dow Jones Stoxx 600.

The Organization for Economic Cooperation and Development lifted its growth outlook for China on Nov. 19, saying the nation’s economy will expand 8.3 percent in 2009. In contrast, the Paris-based group said Japan will contract 5.3 percent this year and recommended the central bank buying more government bonds to grapple with deflation.

Interest Rates Near Zero

The Bank of Japan on Nov. 20 kept its overnight lending rate at 0.1 percent and raised its economic assessment even as government pressure for it to fight deflation intensified.

Mitsubishi UFJ, Japan’s biggest listed bank, fell 7.3 percent to 471 yen. The lender planned to raise as much as 1 trillion yen ($11.2 billion) by selling common stock, Mitsubishi UFJ said on Nov. 18, as international regulators worked on tighter capital rules.

Hitachi, which makes rice cookers and builds nuclear power plants, slid 14 percent to 253 yen, the steepest slump since the week ended May 15. The company will sell stock for the first time in 27 years, Hitachi said on Nov. 16.

Tokyo Tatemono Co., a property developer, and Nomura Real Estate Residential Fund Inc. also tumbled after revealing share- sale plans. Tokyo Tatemono lost 21 percent to 325 yen, while Nomura Real Estate slumped 15 percent to 352,000 yen.

Valuation Concerns

Sony sank 5.5 percent to 2,410 yen. The Tokyo-based company said on Nov. 19 that it’s aiming for a 10 percent return on equity by March 2013, which is later than its previous target of March 2011.

The new prediction from Sony helped fuel concerns that Asian equities had become too expensive relative to earnings expectations. The MSCI Asia Pacific Index has climbed 66 percent since March 9 amid signs the global economy is recovering from its worst slowdown since World War II.

Stocks on the gauge trade at an average 1.5 times book value, up from 1 at the March low. Shares on the U.S. Standard & Poor’s 500 Index are valued at 2.2 times, while Europe’s Dow Jones Stoxx 600 Index is at 1.7 times.

“The market has gone up a lot in a short span of time, so I would expect to see a correction in the near-term, since it’s not extremely cheap,” said Nicholas Yeo, head of Hong Kong and China equities at Aberdeen Asset Management Co., which manages $40 billion in Asian equities.

Asset Bubbles?

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said Nov. 19 the risk of new asset bubbles in global economies and markets is rising, echoing similar comments by Hong Kong Exchanges & Clearing Ltd.’s Chairman Ronald Arculli the previous day.

Samsung, which counts China as its biggest market by revenue, jumped 5.7 percent to 755,000 won, the first weekly since September. The company on Nov. 16 raised its flat-panel TV shipment target for this year by 15 percent.

Lihir climbed 6.6 percent to A$3.58, a third weekly advance. Newcrest Mining Ltd., Australia’s largest gold producer, added 3.7 percent to A$35.84.

Gold for immediate deliver rose to a record $1,152.85 an ounce on Nov. 18 as the weakening U.S. currency prompted investors to flock to the metal as a haven. The dollar has depreciated in 2009 against all the 16 major currencies tracked by Bloomberg.