Business IdeasAsian stocks fall for fourth day on China rate concern
Asian stocks fell for the fourth straight day as China’s fastest quarterly economic growth since 2007 and Indian food inflation raised concern about government action to control price increases.
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Industrial & Commercial Bank of China (ICBC) and China Construction Bank Corp sank at least 1.6 per cent in Hong Kong. Larsen & Toubro, India’s biggest engineering company, tumbled 6.5 per cent after profit slid by half. Santos Ltd, Australia’s third-largest oil and gas producer, declined 1.1 per cent after sales during the fourth quarter dropped.
The MSCI Asia Pacific Index lost 0.5 per cent to 123.61 at 7.45 pm in Tokyo, with about five stocks falling for every four that rose. The measure has jumped 50 per cent in the past 12 months as growth in China helped the global economy emerge from the worst slowdown since World War II.
“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.”
Hong Kong’s Hang Seng Index fell 2 per cent, while China’s Shanghai Composite Index advanced 0.2 per cent. Australia’s S&P/ASX 200 Index lost 0.8 per cent. The Bombay Stock Exchange’s Sensitive Index fell 2.4 per cent after a government index of food inflation stayed above 15 per cent.
Japan’s Nikkei 225 Stock Average climbed 1.2 per cent, with Toyota Motor Corp pacing gains among automakers as a weaker yen boosted the outlook for export earnings. South Korea’s Hynix Semiconductor Inc. advanced 2.2 per cent after reporting its biggest quarterly profit in three years.
Futures on the US Standard & Poor’s 500 Index lost 0.2 per cent even as Starbucks Corp, the world’s largest coffee-shop operator, and EBay Inc, the most-visited US e-commerce site, reported better-than-estimated profit after markets closed. The S&P 500 lost 1.1 per cent yesterday.
Industrial & Commercial Bank of China, the world’s biggest bank by market value, fell 2.9 per cent to HK$5.72, the third-biggest drag on the MSCI Asia Pacific Index. China Construction Bank dropped 1.6 per cent to HK$6.12.
China’s fourth-quarter gross domestic product grew 10.7 per cent from the same period a year ago, more than the median forecast of 10.5 per cent in a Bloomberg News survey, a statistics bureau report showed in Beijing on Thursday.
The report may stoke speculation the central bank will raise its benchmark interest rate and tighten restrictions on the nation’s lenders. Minutes after the release, traders said the People’s Bank of China guided three-month bill yields higher at an auction for the second time in two weeks.
Economic growth of 10 per cent or more is excessive, monetary policy committee member Fan Gang said in November. The PBOC ordered ICBC to raise its reserve ratio by 0.5 percentage point, Reuters reported late yesterday, citing two unidentified people. A spokesman for the lender declined to comment.
“At this point, too much growth increases fear of inflation, and not enough growth increases the fear of a recession,” said Roger Groebli, Singapore-based head of financial-market analysis at LGT Capital Management, which oversees about $75 billion in assets. “The government has to make sure the recovery will continue smoothly and not build up a bubble,” he added.
Property developers with projects in China declined on concern tighter lending restrictions will curb real-estate demand. Shimao Property Holdings Ltd dropped 3.7 per cent to HK$12.58, the lowest since September 2. Henderson Land Development Co, a Hong Kong-based developer which gets 12 per cent of sales from China, slumped 4.1 per cent to HK$51.90.
“The strong GDP growth will spur a normalisation of easy monetary conditions in China but I don’t think there will be a serious tightening,” said Khiem Do, Hong Kong-based head of multi-asset strategy at Baring Asset Management (Asia), which oversees $11 billion. “That’s not going to trigger a slowdown.”
Consumer prices in China rose 1.9 per cent in December from a year earlier, Thursday’s data showed, after a 0.6 percent gain in November. Producer prices climbed 1.7 percent, after declining for the previous 12 months.
Signs of a recovery in Asia’s economies have helped drive the MSCI Asia Pacific Index up by 75 per cent from a more than five-year low on March 9. Stocks on the gauge are priced at 1.63 times book value, near the highest level since September 2008.
Developing Asian economies faced the risk of asset bubbles or overheating as the region’s growth outpaced the rest of the world this year, the World Bank said in a report on Thursday. An index of wholesale food articles compiled by the commerce ministry rose 16.81 per cent in the week ended January 9 from a year earlier.
Larsen & Toubro sank 6.8 per cent to Rs 1,524.1. The company cut its sales forecast for the year ending March 31 after customers delayed projects, Chief Financial Officer YM Deosthalee said. His comment came after Larsen & Toubro reported third-quarter profit fell 50 per cent.
Santos fell 1.1 per cent to A$13.48 after saying fourth-quarter sales dropped 7 per cent because of lower oil prices. Crude oil for March delivery sank 2 per cent to $77.74 a barrel in New York yesterday, while copper futures fell 2.7 per cent.
BHP Billiton, the world’s largest mining company, dropped 1.7 per cent to A$42.67. Rio Tinto Group, the world’s third-biggest mining company, retreated 3.2 per cent to A$75.55. The two companies were the biggest drags on the MSCI Asia Pacific Index.
Japanese auto makers advanced on optimism the weaker yen would boost the value of overseas sales when converted into the companies’ home currency. The yen depreciated to 91.56 against the dollar, the weakest intraday level since January 14, from 91.24 yesterday. Toyota, which gets 31 per cent of sales in North America, jumped 2.1 per cent to ¥4,190. Honda Motor Co added 1.7 per cent to ¥3,310.