Asian Stocks on Course for Biggest Drop in Two Months

By Adam Haigh - Aug 20, 2013 1:55 AM PT

Asia’s benchmark stock index headed for the biggest drop in two months as investors sold riskier assets across the region after concern the U.S. will cut stimulus drove Treasury yields to a two-year high.

QBE Insurance Group Ltd. (QBE) sank 5.5 percent as first-half net income at Australia’s largest insurer by market value plunged 37 percent. BHP Billiton Ltd. (BHP) dropped 1.4 percent in Sydney before the world’s biggest miner reported profit that missed analyst estimates.Everbright Securities Co. (601788) slumped 10 percent in Shanghai as trading resumed after an error at the Chinese brokerage whipsawed stocks last week.

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A statue of a bull stands in front of an electronic board displaying the closing figure of the Jakarta Composite Index (IDX Composite) at the Indonesia Stock Exchange in Jakarta on Aug. 19, 2013. Photographer: Dimas Ardian/Bloomberg

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Aug. 20 (Bloomberg) -- Sean Darby, chief global equity strategist at Jefferies Group Inc. in Hong Kong, talks about the outlook for markets in Asia and his investment strategy. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

The MSCI Asia Pacific Index slid 1.8 percent to 131.33 as of 4:25 p.m. in Hong Kong, with all 10 industry groups on the gauge sliding at least 1 percent. Almost seven shares fell for each that rose on the measure, which is on course for its lowest close since July 8. Every market declined across the region except for New Zealand and Pakistan.

“It’s a very uncomfortable period,” Richard Yetsenga, head of global markets research in Sydney at Australia & New Zealand Banking Group Ltd., told Bloomberg TV. “This has further to run before we look to get back in. Asia as a whole, even though the data’s probably OK, is not going to feel like a great place for a while as we adjust to the new world order where U.S. bond yields are going up, not down.”

Japan’s Topix index retreated 2.1 percent. Australia’s S&P/ASX 200 Index fell 0.7 percent as it declined a fifth day, the longest streak of losses in three months. New Zealand’s NZX 50 Index gained 0.1 percent.

South Korea’s Kospi index slipped 1.6 percent. Hong Kong’s Hang Seng Index dropped 2.2 percent and the Hang Seng China Enterprises Index (HSCEI) sank 2.9 percent, the most since July 3. China’s Shanghai Composite slid 0.6 percent. Taiwan’s Taiex Index lost 0.9 percent and Singapore’s Straits Times Index retreated 1.7 percent.

China, Fed

The Asia-Pacific measure gained 3.4 percent this year through yesterday, lagging a 15 percent surge in the Standard & Poor’s 500 Index as growth slows in China and speculation that the Federal Reserve will curb bond buying spurred investors to sell assets across Asia andemerging markets. Investors will be watching the release of the Federal Open Market Committee’s July meeting minutes tomorrow for hints as to when the stimulus draw down will begin.

The Asia-Pacific gauge yesterday traded at 13 times estimated earnings compared with 14.9 for the S&P 500 Index and 13.9 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

The Jakarta Composite Index fell as much as 5.8 percent, extending a retreat to more than 20 percent from this year’s peak. Thailand’s SET Index (SET) slumped 3 percent, heading for its lowest close since December. India’s S&P BSE Sensex gauge lost 0.9 percent. Indonesia’s record current-account deficit and Thailand’s recession spurred concern that capital outflows from emerging markets will accelerate.

Emerging Markets

Emerging markets from Brazil to Indonesia have raised borrowing costs in 2013 to try to aid their currencies as the prospect of reduced U.S. monetary stimulus curbs demand for assets in developing nations.

S&P 500 futures fell 0.2 percent today. The U.S. equities gauge yesterday completed its first four-day decline of the year as energy shares dropped and Treasury yields jumped to a two-year high.

Japan’s Topix gained 31 percent this year, the world’s best-performing developed equity market, amid optimism Prime Minister Shinzo Abe will push through reforms while the central bank provides record stimulus to spur an economic recovery. Trading volume on the gauge yesterday fell to the lowest level since December as investors took summer vacations.

Raw Materials

QBE fell 5.5 percent to A$16.10 in Sydney. Net income dropped to $477 million in the six months ended June 30, missing the $555 million median estimate of seven analysts surveyed by Bloomberg News.

Raw-material shares fell as metals prices sank. Jiangxi Copper Co., China’s biggest producer of the metal, slid 4.4 percent to HK$14.84 in Hong Kong. BHP Billiton fell 1.4 percent to close at A$36.54. The miner reported after the close that net income dropped to $10.9 billion in the year to June 30 from $15.4 billion a year ago. Profit, excluding one-time items, was $11.8 billion, missing a median forecast of $12.7 billion of seven analysts surveyed by Bloomberg.

The S&P GSCI index of commodities dropped 0.8 percent today after the London Metal Exchange Index of industrial metals declined 1.3 percent yesterday.

Everbright slumped 10 percent, the daily limit for losses in Shanghai, as trading resumed. The China Securities Regulatory Commission banned the state-controlled brokerage, the country’s 12th-largest by revenue, from proprietary trading for three months after 23.4 billion yuan ($3.8 billion) of erroneous buy orders on Aug. 16.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

To contact the editor responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net