Asian Stocks Decline for Fourth Consecutive Week on Valuations

Jan 24, 2014 6:34 am ET

Jan. 24 (Bloomberg) -- Asian stocks fell, with the regional benchmark index posting its longest streak of weekly losses in more than 1 1/2 years, amid concern earnings growth will miss estimates on signs of weakness in China’s economy.

Honda Motor Co. fell 2.4 percent in Tokyo after the yen strengthened the most in four months yesterday, dragging Japanese exporters lower. The Reject Shop Ltd. slumped 32 percent in Sydney after profit at the discount retailer missed estimates. Newcrest Mining Ltd., an Australian gold producer, rose 3.8 percent after the precious metal surged in New York.

The MSCI Asia Pacific Index lost 0.8 percent to 137.71 as of 7:33 p.m. in Hong Kong. All 10 industry groups retreated. The measure is down 1.3 percent this week, a fourth straight loss, as a survey from HSBC Holdings Plc and Markit Economics indicated Chinese factory output will shrink this month.

“A correction could occur,” Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which oversees $131 billion, said by e-mail. “We have to expect more volatility. Shares are no longer dirt cheap, meaning the easy gains are behind us and we are now more dependent on rising earnings coming through.”

The regional measure’s 6.6 percent advance from its Aug. 28 low pushed valuations on the gauge to 12.9 times estimated earnings.

Regional Gauges

Japan’s Topix index fell 1.8 percent and the Nikkei 225 Stock Average declined 1.9 percent after the yen strengthened against the dollar yesterday by the most since Sept. 18. Honda lost 2.4 percent to 3,995 yen. South Korea’s Kospi index slid 0.4 percent and New Zealand’s NZX 50 Index declined 0.8 percent.

Australia’s S&P/ASX 200 Index slid 0.4 percent. JPMorgan Chase & Co. and Westpac Banking Corp. pushed back their forecasts for when Australia’s central bank will lower interest rates, with the strongest inflation in two years offsetting rising joblessness. Singapore’s Straits Times Index lost 0.8 percent and Taiwan’s Taiex index was little changed.

Futures on the Standard & Poor’s 500 Index lost 0.8 percent. The measure fell 0.9 percent yesterday and the Dow Jones Industrial Average closed at a one-month low as investors analyzed corporate earnings.

Hong Kong’s Hang Seng Index slid 1.3 percent and the Hang Seng China Enterprises Index, known as the H-share gauge of mainland firms listed in the city, slipped 0.9 percent. One- third of investors surveyed in a Bloomberg Global Poll this month said China’s economic slowdown is the world’s major risk, up from 26 percent in November.

DeMark Forecast

China’s Shanghai Composite Index added 0.6 percent. The measure will probably bottom out within days and begin to rebound, said Tom DeMark, a developer of market-timing indicators who predicted the measure’s rally from a four-year low in June.

The gauge may slip to as low as 1,952, or 4.4 percent below yesterday’s close, and then rally “sharply,” DeMark wrote in an e-mailed response to questions from Bloomberg News yesterday. The Shanghai Composite, which touched an intraday low of 1,984.82 on Jan. 20, has lost 3.5 percent this year.

The Reject Shop declined 32 percent to A$11.50. The company said net income after tax will be between A$17 million and A$18 million. That compares with an estimate of A$24 million, according to the average of four analysts surveyed by Bloomberg.

Newcrest gained 3.8 percent to A$9.48 in Sydney. Zijin Mining Group Co. advanced 1.8 percent to HK$1.71 in Hong Kong. Gold surged 2.2 percent in New York yesterday.

Lenovo Group Ltd., which agreed to buy International Business Machines Corp.’s low-end server unit yesterday, beat out prospective bidder Fujitsu Ltd. because that company would have needed several more weeks to conduct due diligence, a person with knowledge of the negotiations said. Lenovo shares, which resumed trading today in Hong Kong, gained 1.2 percent to HK$10.44.

Citic 21CN Co. posted a four-fold surge after Alibaba Group Holding Ltd. and Yunfeng Capital said they will buy a majority stake in the firm. The shares rose 372 percent to HK$3.92.

--Editors: John McCluskey, Sarah McDonald