Tuesday, 15 January 2013

Asian Stocks Drop on Overheating Signs; Nikkei 225 Falls

By Jonathan Burgos & Anna Kitanaka - Jan 16, 2013 8:05 AM GMT+0400

Asian stocks fell, with the regional benchmark index heading for its first loss in three days, amid signs markets are overbought and as Japanese shares retreated as a stronger yen dimmed the outlook for export earnings.
Honda Motor Co. (7267), which gets 81 percent of its auto sales overseas, slipped 2.1 percent in Tokyo. Industrial & Commercial Bank Ltd., the world’s biggest lender by market value, fell 1.2 percent in Hong Kong after Premier Wen Jiabao said China should “gradually” establish a property tax system. Boral Ltd. surged 11 percent after the Australian building-materials supplier announced job cuts to reduce cost amid a slowdown in the construction industry.
Asian Stocks Decline as Japanese Shares Retreat After Yen Gains
Employees work on the trading floor of the Tokyo Stock Exchange in Tokyo. Japanese stocks fell even as the nation’s machinery orders, an indicator of capital spending, rose 3.9 percent in November from the previous month. Photographer: Tomohiro Ohsumi/Bloomberg
Jan. 15 (Bloomberg) -- Jim O'Neill, chairman of Goldman Sachs Asset Management, talks about the yen, Bank of Japan monetary policy and the Swiss franc. O'Neill speaks with Tom Keene and Sara Eisen on Bloomberg Television's "Surveillance." Ian Bremmer, president of Eurasia Group, also speaks (Source: Bloomberg)
The MSCI Asia Pacific Index slid 0.5 percent to 132.02 as of 12:53 p.m. Tokyo time, with about two stocks falling for each that rose. The gauge has rallied since November after reports showed China’s economy is recovering and Japanese shares gained on speculation new Prime Minister Shinzo Abe will pursue more aggressive policies to stimulate the world’s third-largest economy.
“We’re seeing shares at an overbought level after such a strong rebound recently,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages almost $126 billion. “The market just needs to consolidate before coming back. The fundamentals are looking better. It’s not going to be a deep correction, just some consolidation. Markets never go up in a straight line.”

Overheating Signs

The 14-day relative strength index, an indicator of momentum, on the the MSCI Asia Pacific Index (MXAP) reached 75 yesterday. A level above 70 is considered by some investors as a sign the market is overbought. Shares on the Asian gauge traded at 14.2 times estimated earnings, compared with 13.3 times for the Standard & Poor’s 500 Index and a multiple of 12 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg News.
Japan’s Nikkei 225 dropped 1.8 percent, retreating from its highest level since April 2010. Readings for the 14-day RSI for both Japan’s benchmark index and broader Topix Index were at least 80 yesterday.
“There should be some short-term selling amid a feeling that shares are overheating and the yen has stopped sliding,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc.
Japanese shares fell even as a report showed the nation’s machinery orders, an indicator of capital spending, rose 3.9 percent in November from October. The median estimate of 24 economists surveyed by Bloomberg News was for a 0.3 percent increase.

Exporters Drop

Exporters declined after the yen rose for a second day, extending its rebound from the lowest level against the dollar in more than two years. A stronger yen reduces the overseas earnings of the nation’s carmakers and electronics manufacturers when repatriated.
Honda dropped 2.1 percent to 3,310 yen. Toyota Motor Corp. (7203), the world’s biggest carmaker, decreased 2.1 percent to 4,175 yen. Canon Inc., the world’s largest camera maker, sank 3.2 percent to 3,280 yen.
Brother Industries Ltd. (6448) dropped 5.5 percent to 911 yen as Credit Suisse cut its rating for the Japanese office-equipment maker to underperform from neutral.
China’s Shanghai Composite Index (SHCOMP) fell 0.4 percent as a report showed the nation’s foreign direct investment declined for the first full year since 2009 as economic growth slowed and manufacturers relocated to markets with cheaper labor.

Property Tax

Chinese lenders and developers declined after Premier Wen said China should “gradually” establish a property tax system that covers trading and ownership. The comments were made during a visit to the finance ministry yesterday, according to a statement posted on the central government’s website.
ICBC, as China’s largest lender is known, dropped 1.2 percent to HK$5.79. Agricultural Bank of China Ltd. slipped 2 percent to HK$3.95. China Overseas Land & Investment Ltd., the biggest mainland homebuilder traded in Hong Kong, fell 1.4 percent to HK$24.65.
Hong Kong’s Hang Seng Index lost 0.3 percent and Taiwan’s Taiex Index declined 0.4 percent. South Korea’s Kospi Index rose 0.3 percent and Australia’s S&P/ASX 200 Index gained 0.4 percent.
The MSCI Asia Pacific Index traded at 14.2 times estimated earnings, compared with 13.3 times for the Standard & Poor’s 500 Index and a multiple of 12 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg News.

Boral, Leighton

Futures on the Standard & Poor’s 500 Index were little changed today. The gauge yesterday added 0.1 percent as a rally in retail and transportation companies overshadowed concern about discussions on raising the U.S. government’s debt ceiling.
Among stocks that gained, Boral jumped 11 percent to A$4.85 after saying it will cut 1,000 jobs, 7 percent of its workforce, to reduce costs amid a slowdown in the construction industry.
Leighton Holdings Ltd. (LEI) added 1.7 percent to A$19.17 after the Australian Financial Review reported Hong Kong’s PCCW Ltd. may bid for the telecommunications infrastructure of Australia’s biggest construction company. PCCW rose 1.8 percent to HK$3.41 in Hong Kong.
To contact the reporters on this story: Jonathan Burgos in Singapore atjburgos4@bloomberg.net; Anna Kitanaka in Tokyo at akitanaka@bloomberg.net
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net