Asian Equities Post Worst Week Since March on China Concerns

Jan. 23 (Bloomberg) -- Asian stocks fell, dragging the benchmark MSCI Asia Pacific Index to its biggest weekly drop since March, on concern the pace of economic growth will prompt central banks from China to India to curb price increases.

Aluminum Corp. of China Ltd., the country’s largest producer of the metal, sank 9.1 percent in Hong Kong. Rio Tinto Group, the world’s third-largest mining company, slid 7.2 percent in Sydney as metal prices fell. Nomura Holdings Inc., Japan’s biggest investment bank, lost 8.8 percent in Tokyo after Credit Suisse Group AG cut its rating. Nissan Motor Co., which gets about 35 percent of its sales from North America, retreated 6.4 percent as U.S. consumer confidence trailed estimates.

“It does look like we’re going through some sort of a correction,” said Shane Oliver, head of investment strategy in Sydney at AMP Capital Investors, which oversees about $90 billion globally. “There are some worries about the extent of tightening in China. I don’t think they’re seeking to crunch their economy, but obviously the market worries that that will be the case.”

The MSCI Asia Pacific Index fell 3.5 percent to 122.39 for the first weekly drop in five. The gauge has jumped 48 percent in the past 12 months as growth in China helped the global economy emerge from the worst slowdown since World War II. The U.S. Standard & Poor’s 500 Index gained 32 percent in that time, while Europe’s Dow Jones Stoxx 600 Index added 37 percent.

Japan’s Nikkei 225 Stock Average declined 3.6 percent this week, the steepest drop since the period ended Nov. 27. Hong Kong’s Hang Seng Index lost 4.3 percent. Australia’s S&P/ASX 200 Index fell 3 percent amid concern the nation may raise taxes on mining projects.

Reduced Risk

Asian equities also fell in the week as U.S. President Barack Obama proposed measures to reduce risk-taking at banks, raising concerns the plans will curb lenders’ profits and hurt the country’s economic recovery.

China’s Shanghai Composite Index dropped 3 percent as government reports on Jan. 21 showed the country’s fourth- quarter gross domestic product grew 10.7 percent, more than economists estimated, while inflation accelerated to a more- than-forecast 1.9 percent in December.

The People’s Bank of China on Jan. 12 unexpectedly raised lenders’ reserve requirements to curb liquidity. The central bank will raise interest rates by the end of June, as well as increasing banks’ reserve requirements, according to the median of 17 forecasts by economists in a Bloomberg News survey.

‘Heavy Lifting’

Aluminum Corp. of China sank 9.1 percent to HK$8.82 in Hong Kong after Goldman Sachs Group Inc. also lowered its rating to “sell” from “neutral.” China Shenhua Energy Co., the nation’s largest coal producer, retreated 8 percent to HK$34.95.

“China has done the heavy lifting in the recovery process, and now needs to cool its economy down a little bit,” said Prasad Patkar, who helps manage about $1.6 billion at Platypus Asset Management in Sydney. “Policy tightening measures will be forthcoming, but they need to be viewed in the context of how strong the economy has been.”

Metal prices fell amid speculation China will restrict lending and raise borrowing costs to prevent the economy overheating. The London Metal Exchange Index, a gauge of six metals including aluminum and copper, fell 2 percent this week, the first drop in six.

In Sydney, Rio Tinto lost 7.2 percent to A$72.94 and BHP Billiton Ltd., the world’s biggest mining company, sank 4.5 percent to A$41.70.

Mining Tax

The Sydney Morning Herald reported on Jan. 22 that a review of Australia’s tax system may recommend taxing mining projects in the same way as energy projects, a change that would have raised an extra A$14 billion ($12.7 billion) over the past three years, the newspaper cited Treasury estimates as saying.

Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer, sank 6.9 percent to A$44.37, its lowest close since August 2009, after saying fourth-quarter revenue declined 23 percent from a year earlier on lower production.

Santos Ltd., Australia’s third-largest oil and gas producer, declined 1.5 percent to A$13.55 after saying its fourth-quarter sales dropped 7 percent on lower oil prices. Crude oil for February delivery declined 4.4 percent this week in New York.

Signs of a pick-up in economies around the region have driven the MSCI Asia Pacific up by almost 50 percent in the past year. Companies on the index are priced at an average 1.6 times book value, near the highest level since September 2008.

“The market remains overheated and there will be some more corrections,” said Mitsushige Akino, who oversees about $450 million at Ichiyoshi Investment Management Co. in Tokyo.

Financial Shares Drop

Nomura Holdings dropped 8.8 percent to 707 yen after being cut to “neutral” from “outperform” by Credit Suisse. Daiwa Securities Group Inc. dipped 3.7 percent to 492 yen after Credit Suisse lowered its rating on the Japanese brokerage sector to “market weight” from “overweight.”

HSBC Holdings Plc, which generates a fifth of its revenue in North America, slipped 5.5 percent to HK$85.70 in Hong Kong. JPMorgan Chase & Co., the largest U.S. bank by market value, reported fourth-quarter revenue that was less than analysts’ estimated. JPMorgan said it was “cautious” about the outlook for consumer loan defaults.

Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by market value, sank 2.6 percent to 493 yen after Barclays Plc said declining sales at domestic-oriented companies will damp demand for corporate loans.

Cautious Outlook

Commonwealth Bank of Australia, the country’s biggest bank, retreated 4 percent to A$55.75 in Sydney.

“Growth is coming through from all the major banks but the rate of improvement that some investors are expecting may not be as strong as previously estimated,” said Tim Schroeders, who helps manage $1.1 billion at Pengana Capital Ltd. in Melbourne.

Nissan fell 6.4 percent to 750 yen, while Honda Motor Co., which gets 42 percent of its sales from North America, dropped 5 percent to 3,230 yen, after a measure of U.S. consumer confidence trailed forecasts.

James Hardie Industries NV, the top seller of home siding in the U.S., sank 7 percent to A$7.97 in Sydney.

The Reuters/University of Michigan preliminary index of consumer sentiment increased to 72.8 in January, lagging behind the 74 projected by economists.

“Wages and the job market have yet to recover,” said Ichiyoshi Investment’s Akino. “With weak consumer spending, a full-scale recovery in the U.S. economy won’t happen soon. Instead, workers will face tougher situations as companies continue restructuring.”