Asian Stocks Fall Most in Two Weeks on China Manufacturing Data

Feb 20, 2014 6:20 am ET

Feb. 20 (Bloomberg) -- Asian stocks fell the most in two weeks after a Chinese manufacturing gauge dropped more than economists had estimated.

Industrial & Commercial Bank of China Ltd., the nation’s largest lender, slid 2.7 percent. Naver Corp. sank 8.1 percent in Seoul amid concern an expansion at WhatsApp Inc. following its acquisition by Facebook Inc. would curb sales at the South Korean Internet site. China Petroleum & Chemical Corp. surged 9.4 percent in Hong Kong after Asia’s biggest oil refiner said it’s seeking private investors.

The MSCI Asia Pacific Index lost 1.3 percent to 135.87 at 6:56 p.m. in Hong Kong as all 10 industry groups declined. A preliminary reading for a China purchasing managers’ index fell to a seven-month low, a report today showed, adding to signs of a factory slowdown that will limit growth. The International Monetary Fund, in a staff report prepared for central bankers and finance ministers from the Group of 20, said yesterday “significant downside risks remain” for the world economy.

“The big thing is the China PMI miss,” Tim Condon, Singapore-based head of Asian research at ING Groep NV, said by phone. “This one will probably cause a bout of market turmoil before it either burns itself out or better data is released and markets calm. It raises the likelihood that the 7.5 percent consensus forecast will be downgraded. China’s importance to the global economy and especially to emerging markets makes a downgrade negative.”

Regional Indexes

Japan’s Topix index lost 2 percent, the most in two weeks. South Korea’s Kospi index fell 0.6 percent. Hong Kong’s Hang Seng Index sank 1.2 percent, while China’s Shanghai Composite Index lost 0.2 percent. Taiwan’s Taiex Index slid 0.6 percent. Singapore’s Straits Times Index and New Zealand’s NZX 50 Index slipped 0.1 percent, while Australia’s S&P/ASX 200 Index added 0.1 percent.

Asian stocks extended losses after the China PMI released today by HSBC Holdings Plc and Markit Economics showed a preliminary February reading of 48.3, compared with January’s final figure of 49.5 and the 49.5 median estimate in a Bloomberg News survey of 17 economists. A number below 50 means that activity contracted.

“The Chinese data does sound bad at face value,” Peter Esho, Sydney-based chief market analyst at Invast Securities Co., said by phone. “It has been weak now for a while and this is a continuation of that slowdown. The real focus for us is seeing how far things fall and where they bottom and find support.”

Banks, Exporters

Financial firms were the biggest drag today on the MSCI Asia Pacific Index. ICBC slid 2.7 percent to HK$4.71 and Agricultural Bank of China Ltd. lost 3.2 percent to HK$3.38.

Japanese exporters fell as the yen strengthened against all its 16 major counterparts. Honda Motor Co., a carmaker that relies on North American for about half of its sales, slid 2.7 percent to 3,652 yen. Toyota Motor Corp. lost 0.9 percent to 5,860 yen.

Futures on the Standard & Poor’s 500 Index dropped 0.1 percent today. The equity benchmark retreated 0.7 percent yesterday as data showed U.S. housing starts sank last month by the most in almost three years and the Federal Reserve indicated stimulus cuts will likely continue.

Fed policy makers backed away from their year-old commitment to consider raising interest rates when unemployment falls below 6.5 percent, according to minutes of their January meeting. With joblessness falling faster than expected even as other labor-market indicators show weakness, policy makers agreed it would “soon be appropriate” to revise their guidance about how long the era of record-low interest rates will remain.

Relative Value

“Several” Fed officials said that in “the absence of an appreciable change in the economic outlook, there should be a clear presumption in favor of continuing to reduce the pace” of bond buying at each meeting. A report at the start of the month showed U.S. manufacturing slowed more than estimated.

The Asian gauge rebounded 2.1 percent this month through yesterday after tumbling 4.6 percent in January amid a rout in emerging-market currencies.

“People are taking a cautious approach after a pretty strong run for equities,” Steven Milch, Sydney-based chief economist at Suncorp Group Ltd., said by phone. “Given uncertainties around economic data and around emerging markets, it’s appropriate that investors are a little bit more cautious.”

Housing Starts

U.S. housing starts fell to an 880,000 annualized rate following December’s revised 1.05 million, the Commerce Department reported in Washington yesterday. The decrease was the biggest since February 2011. The median estimate of 84 economists surveyed by Bloomberg called for 950,000.

Newcrest Mining Ltd., an Australian gold producer, lost 4.2 percent to A$10.68.

Naver retreated 8.1 percent to 689,000 won. The shares fell amid concern about WhatsApp’s possible expansion after Facebook’s purchase for as much as $19 billion in cash and stock, according to Choi Yun Mee, a Seoul-based analyst at Shinyoung Securities.

Sinopec surged 9.4 percent to HK$6.62. The Beijing-based operator of the nation’s largest network of fuel stations plans to sell as much as 30 percent of its oil retail unit to private investors, according to a statement yesterday. Sinopec is welcoming investors after China unveiled in November the biggest package of reforms since the 1990s, including the promise to encourage more private investment in state-controlled industries.

Leighton Holdings Ltd. jumped 4.9 percent to A$17.21 after underlying profit at Australia’s largest construction company topped estimates.

--With assistance from Kyoungwha Kim and Jonathan Burgos in Singapore. Editors: Sarah McDonald, Richard Frost