Asia Stocks Drop for Second Week on Dubai, Share Sale Concerns
Nov. 28 (Bloomberg) -- Asian stocks dropped for the secondstraight week on concern that companies will book losses fromDubai’s plan to delay debt payments and that share sales bybanks will erode the value of existing holdings.
Kajima Corp. fell 16 percent after Daiwa Securities SMBC Co.said Japanese builders may lose “tens of billions of yen” ifDubai’s investment fund succeeds in delaying debt payments. Bankof China Ltd., which said this week it’s studying options toreplenish capital, dropped 13 percent. Sony Corp., the maker ofthe PlayStation 3 game console, slid 6 percent as the dollarsank to a 14-year low against the yen. Santos Ltd., Australia’sthird-biggest producer of oil and gas, slumped 4.6 percent ascrude oil prices retreated in New York.
The MSCI Asia Pacific Index fell 2.6 percent to 113.90 thisweek, dragged down the most by financial companies. The gaugehas climbed 61 percent from its lowest level in more than fiveyears on March 9, amid signs government stimulus measures arereviving economies around the world.
“People are worried about the contagion effect fromDubai,” said Nader Naeimi, a Sydney-based strategist at AMPCapital Investors, which oversees $75 billion. “Events likethis bring back all the bad memories from the global financialcrisis. The market has rallied a long way and is very sensitiveto any bad news around debt default or financial problems.”
Vietnam Plunges
Japan’s Nikkei 225 Stock Average index lost 4.4 percentfor a fifth weekly drop, even as exports last month fell at theslowest pace in a year as government spending helped bolsterdemand. South Korea’s Kospi Index sank 5.9 percent, during aweek in which a central bank survey showed manufacturers’confidence slipped to the lowest level in four months.
Hong Kong’s Hang Seng Index declined 5.9 percent, and theShanghai Composite Index retreated 6.4 percent. Vietnam’s VNIndex tumbled 12 percent as the central bank devalued thecurrency to curb inflation and narrow the trade deficit.
The MSCI Asia Pacific Index has risen almost 30 percentthis year, on course for its steepest annual increase since 2003,on growing signs of a global economic revival. That has swelledthe average price of stocks in the gauge to 21 times estimatedearnings, compared with about 18 times for the S&P 500 and 15times for Europe’s Dow Jones Stoxx 600 Index.
“Markets tend to consolidate after a very strongperformance,” said Paul Xiradis, who manages $10 billion atAusbil Dexia Ltd. in Sydney. “It’s a bit of a patience gamefrom here. What we want to see is ongoing confirmation thatthings are improving, and then that being translated intoimproved earnings.”
Contractors Tumble
Markets were roiled this week after Dubai World, thegovernment investment company burdened by $59 billion ofliabilities, said it will ask creditors for a “standstill”agreement as it negotiates to extend maturities. The sheikdomborrowed $80 billion during a four-year construction boom.
Kajima, Japan’s largest publicly traded constructioncompany, lost 16 percent to 162 yen in the week. Japan’scontractors may lose “tens of billions of yen” should theyfail to receive revenue from projects, Hiroki Kawashima, ananalyst at Daiwa Securities, said in a report on Nov. 27.
Leighton Holdings Ltd., Australia’s biggest constructioncompany, fell 4.2 percent to A$34.77 in Sydney. The company saidit’s confident of recovering money owed it in Dubai through itsownership of a 45 percent stake in Al Habtoor Engineering.
Woori Finance Holdings Co. sank 19 percent to 13,300 won inSeoul, the steepest decline in the MSCI Asia Pacific Index.South Korean financial companies had a combined $32 million inloans and investments associated with Dubai World and itsproperty unit at the end of September, according to thecountry’s financial regulator.
Turning Point?
“It is too early to say that this event on its own willprove to be a turning point in the markets, but it does serve asa reminder that dislocations remain in the financial systemglobally,” said Tim Schroeders, who helps manage $1.1 billionat Pengana Capital Ltd. in Melbourne. “Investors need to remainever vigilant regarding risk.”
Bank of China slumped 13 percent to HK$4.13 after sayingit’s studying “various options” to replenish capital. Thecompany advanced the most new loans among Chinese lenders in thefirst nine months, and Goldman Sachs Group Inc. said possiblecapital raisings could create a “sector overhang.” In Shanghai,Industrial & Commercial Bank of China Ltd. retreated 5.5 percentto 5.18 yuan.
China’s five largest banks submitted preliminary plans forraising capital to the industry regulator, according to fourpeople with knowledge of the matter. The nation’s 11 largestpublicly traded banks may need to raise about 300 billion yuan($43.9 billion) by selling shares and bonds to ensure they haveadequate capital for continued loan growth, BNP Paribas SA saidin a report on Nov. 20.
Share Sales
“Should so many big banks propose to raise capital, thatwill be a big blow to investors’ confidence as it will hurt themarket’s liquidity,” Li Jun, a strategist at Central ChinaSecurities Holdings Co., said in Shanghai.
Sumitomo Mitsui Financial Group Inc., Japan’s second-largest bank by market value, fell 6.9 percent in the week to2,620 yen as the Nikkei newspaper said banks are preparing a newround of share sales. Mitsubishi UFJ Financial Group Inc.,Japan’s biggest publicly traded bank, lost 5.7 percent to 444yen. The two banks are among those with the weakest capital,according to S&P analysis this week.
Sony retreated 6 percent to 2,265 yen, as the stronger yenthreatened to reduce the value of overseas sales at Japanesecompanies when converted into their home currency. Pioneer Corp.,the maker of car-navigation systems and audio equipment, tumbled12 percent to 221 yen.
Santos fell 4.6 percent to A$14.33. Crude oil tumbled about5 percent during the Asian trading week amid concern the pace ofa recovery in demand will stall in the U.S., the biggest energy-consuming nation.
In Hong Kong, PetroChina Co., China’s largest oil producer,dropped 5.8 percent to HK$9.38. Cnooc Ltd., China’s largestoffshore oil producer, lost 6.2 percent to HK$11.78.
To contact the reporter for this story:Shani Raja in Sydney at sraja4@bloomberg.net.
Last Updated: November 27, 2009 19:44 ESTSource: Bloomberg
