Asian Stocks Drop as China Manufacturing Unexpectedly Contracts

Jan 23, 2014 3:21 am ET

Jan. 23 (Bloomberg) -- Asian stocks fell, with the regional benchmark index heading for its lowest close in a month, after a gauge of China’s manufacturing unexpectedly contracted.

China Construction Bank Corp. slid 3 percent in Hong Kong, pacing losses among Chinese lenders. Hang Lung Properties Ltd., the Hong Kong developer investing more than $8.5 billion building malls in mainland China, declined 5.1 percent after posting a drop in underlying profit. Insurance Australia Group Ltd. lost 3 percent after the nation’s largest car and home insurer lowered its growth forecast for gross premiums.

The MSCI Asia Pacific Index fell 1.2 percent to 138.33 as of 5:05 p.m. in Tokyo, on course for its lowest close since Dec. 18. All 10 industry groups on the gauge dropped. The measure extended losses as a private gauge of China’s manufacturing dropped to a six-month low in January, adding to signs growth in the world’s second-largest economy is slowing.

“Growth in China isn’t going to pick up as the government is focused on rebalancing the economy and reducing reliance on credit,” Manpreet Gill, a Singapore-based senior investment strategist at Standard Chartered Bank, said by phone. “While Chinese equities look inexpensive, they lack catalysts. Ongoing reforms in China will be a key challenge for markets this year.”

The preliminary reading of 49.6 for a Purchasing Managers’ Index released today by HSBC Holdings Plc and Markit Economics compares with a final figure of 50.5 in December and a 50.3 median estimate of 19 analysts in a Bloomberg News survey. A number below 50 indicates contraction.

Cash Crunch

China’s Shanghai Composite Index slid 0.5 percent. The gauge rallied by the most in two months yesterday after the nation’s central bank added funds to the financial system this week to lower money-market rates. The Hang Seng China Enterprises Index of mainland companies traded in Hong Kong fell 2.1 percent and the city’s benchmark Hang Seng Index dropped 1.5 percent.

South Korea’s Kospi index slipped 1.2 percent. Australia’s S&P/ASX 200 Index fell 1.1 percent and New Zealand’s NZX 50 Index lost 0.8 percent. Japan’s Topix index decreased 0.9 percent. Taiwan’s Taiex index lost 0.4 percent and Singapore’s Straits Times Index slid 1 percent.

The Asia-Pacific benchmark stock gauge traded at 13.2 times estimated earnings yesterday, compared with 15.6 for the Standard & Poor’s 500 Index and 14.1 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Futures on the S&P 500 slid 0.3 percent today. Most U.S. stocks rose yesterday as investors assessed earnings from companies including Norfolk Southern Corp., Coach Inc. and International Business Machines Corp. The S&P 500 added less than 0.1 percent, with three stocks advancing for every two that declined.

Troubled Trust

Chinese lenders declined in Hong Kong. China Construction Bank, the nation’s second-largest lender by market value, dropped 3 percent to HK$5.45. Agricultural Bank of China Ltd. fell 2.6 percent to HK$3.40.

Industrial & Commercial Bank of China Ltd. slipped 3.4 percent to HK$4.81 as investors in a troubled trust product distributed by the bank met the lender’s officials at a private- banking branch in Shanghai, demanding their money amid concerns of a default.

Hang Lung Properties sank 5.1 percent to HK$23.10. Profit excluding revaluation gains and deferred taxes fell 18 percent to HK$5.05 billion ($651 million) from a year earlier as the company sold fewer investment properties.

Insurance Australia sank 3 percent to A$5.60 in Sydney. Gross premiums are expected to rise by between 3 percent and 5 percent for the year ending June, down from an earlier estimate of between 5 percent and 7 percent, the Sydney-based insurer said in a statement today.

Among stocks that advanced, Nidec Corp. jumped 5.6 percent to 11,715 yen in Tokyo after after the precision-motor manufacturer boosted its full-year profit forecast and announced a share buyback.

--Editors: Sarah McDonald, Tom Redmond