Asian stocks fell, dragging the MSCI Asia Pacific Index to a two-week low, amid speculation Japanese and Chinese banks will have to sell shares to replenish capital.
Sumitomo Mitsui Financial Group Inc., Japan’s second- largest bank by market value, fell 4.4 percent after the Nikkei newspaper said banks are preparing a new round of share sales. Bank of China Ltd. slumped 4 percent in Hong Kong after saying it’s studying options to raise funds. Suning Appliance Co., China’s biggest home appliance retailer, fell 5.5 percent in Shanghai on valuation concerns.
The MSCI Asia Pacific Index lost 0.9 percent to 116.68 as of 6:02 p.m. in Tokyo, set to close at the lowest level since Nov. 6. The gauge has climbed 65 percent from a more than five- year low on March 9 on signs government stimulus measures are helping revive the world economy. A global rally yesterday drove the MSCI World Index up by the most in two weeks.
“Markets have had a huge run on expectations of a recovery,” said Matt Riordan, who helps manage about $5.1 billion at Paradice Investment Management in Sydney. “We’re in a period now where signals that the recovery has been priced in are coming through. The market is discriminating a lot more in terms of stocks.”
China’s Shanghai Composite Index slumped 3.5 percent, while Hong Kong’s Hang Seng Index lost 1.5 percent. South Korea’s Kospi Index dropped 0.8 percent and Australia’s S&P/ASX 200 Index retreated 0.7 percent.
The Nikkei 225 Stock Average lost 1 percent in Japan, where markets resumed trading after a holiday. Japan’s Finance Minister Hirohisa Fujii said monetary policy is key to fighting deflation, signaling the central bank should do more to stem price declines.
Home Sales
Japan Airlines Corp. tumbled 8.4 percent after Mitsui & Co. said it sold its stake in the carrier. Among stocks that advanced, Tokyo Gas Co. gained 1.2 percent on speculation utilities’ earnings will be insulated from any slowdown.
Futures on the Standard & Poor’s 500 Index lost 0.2 percent following a 1.4 percent gain by the gauge yesterday. Speculation the Federal Reserve will keep borrowing costs near record low levels grew after Charles Evans, president of the Fed Bank of Chicago, told the Financial Times that U.S. interest rates may stay near zero until “late 2010, perhaps later.”
The MSCI Asia Pacific Index has risen 30 percent this year, on course for its steepest annual increase since 2003. That has swelled the average price of stocks in the gauge to 21.6 times estimated earnings, compared with 18 times for the S&P 500 and 16 times for Europe’s Dow Jones Stoxx 600 Index.
Second Wave
Sumitomo Mitsui fell 4.4 percent to 2,690 yen in Tokyo. Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded bank, lost 2.8 percent to 458 yen. The two banks are among those with the weakest capital, according to S&P analysis.
Japan’s major banks are preparing a second wave of capital increases to meet stricter rules on capital adequacy, the Nikkei newspaper said. The Basel Committee on Banking Supervision will issue proposals by the end of this year on new capital rules, central bankers and regulators said in a statement in September.
The world’s biggest banks and brokerages have raised $1.5 trillion in capital to repair balance sheets damaged by the credit crisis, according to data compiled by Bloomberg. The FT reported Lloyds Banking Group Plc plans to offer new shares at a “huge discount” in the U.K.’s biggest rights issue to help rebuild its balance sheet.
Bank of China dropped 4 percent to HK$4.62 after saying it’s studying “various options” to replenish capital after advancing the most new loans among Chinese lenders in the first nine months. In Shanghai, Industrial & Commercial Bank of China Ltd. retreated 2.7 percent to 5.32 yuan.
Adequate Capital
China’s five largest banks submitted preliminary plans for raising capital to the industry regulator, according to four people with knowledge of the matter. The nation’s 11 largest publicly traded banks may need to raise about 300 billion yuan ($44 billion) by selling shares and bonds to ensure they have adequate capital for continued loan growth, BNP Paribas SA said in a report last week.
“Should so many big banks propose to raise capital, that will be a big blow to investors’ confidence as it will hurt the market’s liquidity,” Li Jun, a strategist at Central China Securities Holdings Co., said in Shanghai.
The Shanghai Composite Index fell from a three-month high on concern recent gains had outpaced earnings prospects. The gauge rallied 16 percent this quarter, the fourth-best performer among 89 global benchmark gauges tracked by Bloomberg, as the economy strengthened and the government pledged to maintain its “moderately loose” monetary policy.
‘Gained Too Quickly’
Suning Appliance slumped 5.5 percent to 18.42 yuan from an 18-month high. SAIC Motor Corp., China’s largest carmaker, fell 4.6 percent to 24.33 yuan.
“Share prices have gained too quickly and earnings have yet to catch up with the rally,” said Xu Lirong, a Shanghai- based fund manager at Franklin Templeton Sealand Fund Management Co., which oversees about $2.6 billion.
Japan Airlines slumped 8.4 percent to 87 yen. Mitsui, the nation’s second-biggest trading house, sold all its 11.7 million shares in the carrier between April and September, a company spokesman who declined to be identified said.
All 10 companies in the Topix Marine Transportation Index fell after the Baltic Dry Index, a measure of shipping rates, declined 1.9 percent yesterday, taking losses in the past two days to 5.1 percent.
Mitsui O.S.K. Lines Ltd., which operates the world’s largest merchant fleet, lost 2.5 percent to 506 yen. Nippon Yusen K.K., Japan’s largest shipping company by sales, retreated 2.4 percent to 289 yen. STX Pan Ocean Co., South Korea’s biggest bulk carrier, lost 3.1 percent to S$13.80 in Singapore.
Seeking Haven
Utilities advanced as some investors sought haven in stocks that pay higher dividends. Tokyo Gas, Japan’s biggest natural gas distributor, added 1.2 percent to 343 yen. Kyushu Electric Power Co. gained 1.3 percent to 1,851 yen. Tokyo Electric Power Co. rose 1.4 percent to 2,245 yen. Utilities in the MSCI Asia Pacific Index have a dividend yield of 2.7 percent, compared with 2.35 percent for the broader gauge.
Woodside Petroleum Ltd., Australia’s second-largest oil producer, added 0.8 percent to A$49.10. The stock gained as much as 4.2 percent after the Australian Financial Review flagged a possible takeover bid led by BHP Billiton Ltd., the world’s largest mining company. Roger Martin, a Woodside spokesman, declined to comment.
Source: Bloomberg.
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