Mar 3, 2014 1:14 AM PT
Photographer: Tomohiro Ohsumi/Bloomberg
Pedestrians walk past an electronic stock board outside a securities firm in Tokyo.
Asian stocks fell a second day and measures of equity volatility surged amid escalating geopolitical tension over Ukraine and after an official gauge of Chinese manufacturing dropped to an eight-month low.
Rio Tinto Ltd. (BHP), the world’s second-largest mining firm, lost 1.6 percent in Sydney as raw-materials shares declined. Mazda Motor Corp., an automaker that gets 73 percent of sales overseas, tumbled 3.5 percent in Tokyo as the yen touched an almost one-month high against the dollar. China’s Shanghai Composite Index (SHCOMP) rose for a fourth day amid speculation lawmakers will announce measures to reform state-owned companies during an annual meeting this week.
The MSCI Asia Pacific Index slid 0.7 percent to 136.85 as of 5:14 p.m. in Hong Kong. Futures on the Standard & Poor’s 500 Index lost as much as 1.1 percent, the biggest decline in a month, after the equity gauge rose to a record at the end of February. U.S. Secretary of State John Kerry said he is preparing to visit Kiev as Russia seized control of Ukraine’s Crimea region, intensifying one of the most serious standoffs since the Cold War ended.
“The immediate concern for markets is the possibility of escalation,” Ric Spooner, Sydney-based chief analyst at CMC Markets, said in an e-mail. “While most consider it unlikely that the West will be drawn into this conflict other than diplomatically, some hedging and de-risking of portfolios is not unusual in these situations.”
Asian shares last week posted a third week of gains and the first monthly advance since October, as company profit forecasts and takeover speculation in the technology industry outweighed concern about the yuan dropping against the dollar. The country’s manufacturing Purchasing Managers’ Index fell to 50.2, the lowest since June, the National Bureau of Statistics and China Federation of Logistics & Purchasing said March 1 in Beijing.
Yen Climbs
Japan’s Topix index lost 1.2 percent as the yen rose as much as 0.5 percent to 101.26 per dollar, the biggest climb in a month. Mazda slid 3.5 percent to 472 yen, while Toyota Motor Corp. declined 1.1 percent to 5,773 yen.
Australia’s S&P/ASX 200 Index (AS51) fell 0.4 percent, Singapore’s Straits Times Index declined 0.9 percent, and Taiwan’s Taiex Index lost 0.4 percent. South Korea’s Kospi index dropped 0.8 percent, while Hong Kong’s Hang Seng Index slid 1.5 percent. New Zealand’s NZX 50 Index gained 0.3 percent to a record high.
Gauges of equity volatility surged across the region. The HSI Volatility Index, which measures the cost of options on Hong Kong’s Hang Seng Index, surged 10 percent, and Japan’s Nikkei Stock Average Volatility Index gained 7 percent, both the biggest climbs in a month.
Ukraine Crisis
A situation in Ukraine has deteriorated as Russian President Vladimir Putin won parliamentary backing to send troops into its southern neighbor. Crimea, where Russian speakers comprise the majority, has become the focal point of Ukraine’s crisis after an uprising that triggered last month’s overthrow of President Viktor Yanukovych. Ukraine has put its forces on combat readiness and U.S. PresidentBarack Obama warned Russia not to intervene.
Gold producers climbed as investors sought assets considered a haven. Bullion for immediate delivery jumped as much as 1.8 percent to $1,350.37 an ounce. Newcrest Mining Ltd. gained 5.7 percent to A$11.99. Zijin Mining Group Co. advanced 3 percent to HK$1.74.
The MSCI Asia Pacific Index climbed 5.9 percent from this year’s low on Feb. 4 through last week, leaving the gauge trading at 13 times the estimated earnings of its constituent companies, compared with 15.8 for the S&P 500 and 14.6 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
People’s Congress
The Shanghai Composite Index rose 0.9 percent, with volume 25 percent above its 30-day average, ahead of the National People’s Congress annual meeting beginning March 5. The latest meeting of the legislature, the first to be overseen by President Xi Jinping and Premier Li Keqiang, comes as leaders pledge to give markets a “decisive” role in the economy.
Investors will be watching the NPC meeting for clues to the next steps to fix local-government finances, charge market prices for natural resources, rein in shadow-banking risks, free up deposit rates and open up state businesses to private investment.
“There is speculation the upcoming NPC meetings will announce reforms,” said Wu Kan, a money manager at Dragon Life Insurance Co., which oversees about $3.3 billion.
The China PMI reading of 50.2 for February compared with January’s 50.5 reading and the 50.1 median analyst estimate in a Bloomberg News survey. A number above 50 signals expansion. A private gauge released today showed manufacturing contracting for a second month in February.
G-8 Meeting
The U.S., the U.K. and Canada are suspending preparations for a meeting of the Group of Eight industrial nations in Russia in June. Russia may lose its membership of the G-8, while the U.S. is considering imposing sanctions, Secretary of State Kerry said yesterday.
PT Matahari Department Store (LPPF), Indonesia’s largest retailer by market value, fell 6.4 percent to 13,100 rupiah in Jakarta. CVC Capital Partners raised about $214 million by further selling down its stake in the company, the Wall Street Journal reported, citing people familiar with the matter.
Sun Hung Kai Properties Ltd., Hong Kong’s second-largest developer, dropped 2.7 percent to HK$96.65 after saying it may raise as much as HK$22.2 billion ($2.9 billion) from issuing convertible warrants.
Sun Art Retail Group Ltd. climbed 7.1 percent to HK$9.45 leading gains on the MSCI Asia Pacific Index today, after China’s largest hypermarket operator posted a 15 percent gain in full-year profit.
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
