Asian Stocks Decline on Europe Debt Concerns, Reports Kim Jong Il Has Died
By Jonathan Burgos and Masaaki Iwamoto
Bloomberg
Dec 18, 2011
Asian stocks fell after Fitch Ratings said it may cut the credit ratings of European nations, dashing hopes policy makers will solve the region’s debt crisis. South Korean shares sank after North Korean media said leader Kim Jong Il has died
HSBC Holdings Plc (5), Europe’s biggest lender, dropped 2.6 percent in Hong Kong on speculation the worsening European debt crisis will hurt bank earnings. China Overseas Land & Investment Ltd., the largest mainland developer listed in Hong Kong, sank 4.1 percent after home prices in most Chinese cities declined last month. Billabong International Ltd. (BBG) slumped 40 percent in Sydney after the Australian surfwear maker cut the outlook for its sales and earnings.
“Europe’s situation continues to be tough,” said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. in Tokyo. “We are likely to see more downgrades for government debt and banks. Stocks (MXAP) will take a hit every time that happens.”
The MSCI Asia Pacific Index dropped 1.9 percent to 110.33 as of 12:17 p.m. in Tokyo, heading for its lowest close since Nov. 25. Almost six shares fell for each that rose in the measure. Losses deepened after Yonhap News reported that Kim Jong Il, the second-generation North Korean dictator who defied global condemnation to build nuclear weapons while his people starved, has died at age 70. South Korea’s Kospi Index sank 4 percent.
Japan’s Nikkei 225 Stock Average (NKY) declined 0.8 percent. Australia’s S&P/ASX 200 fell 2.3 percent. Hong Kong’s Hang Seng slipped 1.8 percent and China’s Shanghai Composite Index lost 2.2 percent.
‘Beyond Reach’ Futures on the Standard & Poor’s 500 Index (SPXL1) lost 0.4 percent today. The index rose 0.3 percent in New York on Dec. 16 as gains by commodity producers overshadowed concerns about the European debt crisis. Fitch Ratings put credit ratings for France, Belgium, Spain, Slovenia, Italy, Ireland and Cyprus under review for a downgrade, saying a “comprehensive” solution to Europe’s crisis is “technically and politically beyond reach.”
“There’s not going to be any upside until this situation is fixed,” Nick Maroutsos, who oversees the equivalent of about $3 billion as co-founder of Sydney-based Kapstream Capital, said in a Bloomberg Television interview. “Given that France might get downgraded, or we could see further sovereign defaults in the coming months, ultimately it’s going to put more pressure on the banks in the European region and also more pressure on the global environment.”
Europe Meeting Shares of financial companies dropped ahead of a conference call by finance ministers in the euro region at 3:30 p.m. Brussels time today to meet a self-imposed deadline to channel additional bailout funds and put together new budget rules to stem the debt crisis and buoy investor confidence.
HSBC fell 2.6 percent to HK$57.35 in Hong Kong. Westpac Banking Corp. (WBC), Australia’s second-biggest lender, dropped 2.3 percent to A$20.03 in Sydney. Mizuho Financial Group Inc. (8411), Japan’s third-largest publicly listed lender, lost 1 percent to 103 yen in Tokyo.
The MSCI Asia Pacific Index declined 2.3 percent last week as signs of slowing economic growth in China and Japan and concern that Europe’s debt crisis is worsening overshadowed improving U.S. data.
Stocks are extending losses today even after the U.S. Congress passed a $1 trillion spending bill to avert a government shutdown.
China Home Prices Chinese developers declined as China’s home prices posted the worst performance this year, with more than half of the 70 biggest cities monitored in November recording declines after the government reiterated plans to maintain property curbs.
China Overseas Land sank 4.1 percent to HK$13.74 in Hong Kong. China Resources Land Ltd., a state-owned developer, dropped 4.2 percent to HK$12.46. Agile Property Holdings Ltd., a real-estate company partly owned by JPMorgan Chase & Co., fell 3.6 percent to HK$6.63.
The MSCI Asia Pacific Index lost 18 percent this year through last week, compared with a 3 percent drop by the S&P 500 and a 15 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.5 times estimated earnings on average, compared with 12.3 times for the S&P 500 and 10.2 times for the Stoxx 600.
Billabong tumbled 40 percent to A$2.17, poised for its biggest decline on record, after saying first-half profit may fall by as much as 26 percent as sales stalled in three key markets, including Australia, Europe and North America. The forecast comes less than two months after the company predicted a strong increase in earnings.
Gauges of raw-material producers and energy companies posted the biggest decline among the 10 industry groups in the MSCI Asia Pacific Index. Crude oil futures traded near a six- week low in New York. Copper, zinc and nickel declined for the first time in three days.
To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Masaaki Iwamoto in Tokyo at miwamoto4@bloomberg.net
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.
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