Asian stocks fell, leading the regional benchmark index toward its lowest close in almost a year after Standard & Poor’s cut the U.S. credit rating, fueling concern a global economic recovery is faltering.
Sony Corp. (6758), which earns almost half its revenue in the U.S. and Europe, slumped 4.4 percent in Tokyo. Toyota Motor Corp., the world’s largest carmaker, retreated 1.7 percent. Li & Fung Ltd. (494), the world’s biggest supplier to retailers including Wal- Mart Stores Inc., dropped 5 percent in Hong Kong. BHP Billiton Ltd. (BHP), the biggest global mining company, sank 3 percent in Sydney as commodity prices tumbled. Some banks in the region pared losses after the Group of Seven nations pledged to support financial stability.
The MSCI Asia Pacific Index, which last week entered a so- called correction after falling more than 10 percent from its May peak, slumped 3 percent to 122.32 as of 1:59 p.m. in Tokyo. More than 25 stocks fell for each that advanced on the gauge.
“Sentiment will take a hit from the U.S. downgrade, and equities markets in particular are the preferred venue for the expression of panic,” said Prasad Patkar, who helps manage the equivalent of $1.7 billion at Sydney-based Platypus Asset Management Ltd. “It’ll take another globally-coordinated effort by central banks and regulators to allay concerns about the knock-on impacts, which means a prolonged period of uncertainty.”
The Asia-Pacific gauge earlier pared losses as some banks rebounded after the Group of Seven nations pledged to take “all necessary measures to support financial stability and growth” and members agreed to inject liquidity and act against disorderly currency moves if necessary.
Nikkei, Kospi
Hong Kong’s Hang Seng Index slumped 4 percent. China’s Shanghai Composite Index fell 3.7 percent, with the index earlier dropping 20 percent from a Nov. 8 high, signaling a so- called bear market to some investors. China’s government is scheduled to release economic data tomorrow including July’s inflation figure which economists estimate will remain at a high for the year of 6.4 percent.
Japan’s Nikkei 225 (NKY) Stock Average fell 2.1 percent and South Korea’s Kospi index slipped 4.2 percent. Australia’s S&P/ASX 200 Index lost 2.4 percent after earlier slipping below the 4,000 level that marks a 20 percent retreat from its April 2010 high.
The Asia-Pacific gauge recorded its biggest weekly retreat in almost three years last week as concern grew that the global recovery is weakening. If it finishes the day at less than 124.94, it will be lower than the last price on March 15, when the index recorded its bottom-most close for the year in the aftermath of Japan’s worst earthquake.
Entering Correction
Last week’s drop was the biggest weekly decline for the MSCI Asia-Pacific Index since October 2008, when credit markets froze after the collapse of Lehman Brothers Holdings Inc. The gauge is down more than 10 percent from its May 2 high, a decline that some analysts say signals a “correction.”
A global rout in equities sparked by concern economic recoveries in the U.S. and Europe may falter has wiped out gains this year for all major benchmark indexes in the world’s developed markets except Iceland’s.
Futures on the Standard & Poor’s 500 Index sank 2.5 percent today. In New York, the S&P 500 slid 0.1 percent on Aug. 5, after swinging between a loss of 2.7 percent and a gain of 1.5 percent as the U.S. unemployment rate declined to 9.1 percent from 9.2 percent, beating estimates. The credit-rating cut was announced after the market closed in New York.
S&P announced the one-level reduction in the U.S.’s sovereign-debt rating to AA+ on Aug. 5. The Treasury Department said there is “no justifiable rationale” for S&P’s move, while S&P’s officials stood by their decision and laid blame on a political system that failed to adequately address deficit reduction in the compromise law that President Barack Obama signed this month to avert a default.
‘Significant Issue’
Sony slumped 4.4 percent to 1,748 yen in Tokyo. Toyota slid 1.7 percent to 2,987 yen. Billabong International Ltd., the world’s biggest surfwear maker that gets almost half its sales from the Americas, fell 2.7 percent to A$5.14 in Sydney, while Li & Fung sank 5 percent to HK$11.44 in Hong Kong.
The U.S. downgrade “has added another significant issue for the global economy and stock markets to overcome,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “The risks remain to the downside for economic growth, with a re-pricing of U.S borrowings likely to impose a higher cost of capital in the future.”
Oil, Metals
Crude for September delivery fell as much as 3.8 percent today on the New York Mercantile Exchange, while a measure of primary metals, including copper and aluminum, dropped 3.7 percent on Aug. 5.
Aluminum Corp. of China Ltd. retreated 7 percent to HK$5.62 in Hong Kong. BHP fell 4 percent to A$36.58 in Sydney. Dongkuk Steel Mill Co., a South Korean steelmaker, plunged 13 percent to 29,700 won in Seoul.
Rio Tinto Group, the world’s second-biggest mining company, fell 4.6 percent to A$68.66 in Sydney, set for the lowest closing price in more than a year. Rio and Mitsubishi Corp. offered A$1.49 billion ($1.55 billion) for the shares in Coal & Allied Industries Ltd. (CNA) they don’t own to take the coal miner private. Commonwealth Bank of Australia (CBA), the nation’s largest lender by market value, pared its loss to 0.2 percent after falling as much as 2.2 percent before the G-7 statement and after the European Central Bank indicated it will buy Italian and Spanish bonds in a bid to contain Europe’s debt crisis.
The MSCI Asia Pacific Index lost 8.4 percent this year through Aug. 5, compared with drops of 4.6 percent by the S&P 500 and 13 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.6 times estimated earnings on average, compared with 12 times for the S&P 500 and 9.8 times for the Stoxx 600.
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