Asian Stocks Drop as U.S. Home Sales Unexpectedly Sink in March

Apr 24, 2014 8:28 am ET

April 24 (Bloomberg) -- Asian stocks fell after an unexpected drop in U.S. home sales signaled a housing recovery in the world’s largest economy is running out of steam, while investors weighed better-than-estimated earnings from Apple Inc. and Facebook Inc.

Toyota Motor Corp., the world’s largest carmaker, slid 1.4 percent, pacing losses among Japanese exporters as the yen gained. Kansai Electric Power Co. sank 4.2 percent in Tokyo after saying it may take a “long time” to restart its nuclear reactors. Catcher Technology Co., which makes casings for iPhones, and Largan Precision Co., a supplier of lenses to Apple, both rose in Taipei.

The MSCI Asia Pacific Index lost 0.3 percent to 138.48 as of 8:221 p.m. in Hong Kong, with nine of 10 industry groups on the gauge falling. Futures on the Standard & Poor’s 500 Index gained 0.4 percent as investors assessed the outlook for corporate earnings. Of the 197 index members that have reported results this season and for which Bloomberg has estimates, 54 percent beat analysts’ projections for revenue.

“Despite better-than-expected earnings from Wall Street, investors remain concerned about China’s slowdown and the sustainability of U.S. economic growth,” Vasu Menon, vice president for wealth management at Oversea-Chinese Banking Corp. in Singapore, said by phone today. “For Asian markets to really see a big recovery, investors have to be convinced that the U.S. is on a solid recovery path.”

Chinese shares headed for their second week of losses after a report yesterday showed a preliminary manufacturing gauge signaled persistent weakness in the world’s second-largest economy. China’s Shanghai Composite Index slid 0.5 percent today. The Hang Seng China Enterprises Index of mainland shares traded in Hong Kong gained 0.4 percent and the city’s benchmark Hang Seng Index added 0.2 percent.

Regional Gauges

South Korea’s Kospi index fell 0.1 percent after rising 0.3 percent earlier. The nation’s economy expanded at a faster pace than forecast, showing momentum that could boost inflation pressures and build a case for an interest-rate hike. Gross domestic product grew 0.9 percent from the previous quarter in the January-March period, the Bank of Korea said today in a statement in Seoul, above the median 0.8 percent estimate of 13 economists surveyed by Bloomberg News. From a year earlier, GDP increased 3.9 percent.

Japan’s Topix index lost 0.8 percent, retreating from a two-week high. Taiwan’s Taiex index slid 0.1 percent. Australia’s S&P/ASX 200 Index rose 0.2 percent after closing yesterday at its highest since June 2008. Singapore’s Straits Times Index increased 0.8 percent.

New Zealand’s NZX 50 Index gained 0.2 percent. The country’s central bank increased interest rates for the second time in two months as an economic recovery gathers pace, and said it will assess the extent to which currency gains curb inflation.

Relative Value

The MSCI Asia Pacific Index traded at 12.6 times estimated earnings compared with 16 for the Standard & Poor’s 500 Index, according to data compiled by Bloomberg.

The S&P 500 slipped 0.2 percent yesterday, snapping a six- day rally, after disappointing earnings from AT&T Inc. and Amgen Inc. and an unexpected drop in home sales.

Commerce Department data showed that sales of new homes unexpectedly plunged 14.5 percent in March to the lowest level in eight months, reflecting a broad-based retreat that signals the industry is facing bigger challenges than just bad weather.

Apple reported after the market closed that second-quarter revenue and profit exceeded analysts’ estimates amid a surge in iPhone sales. The world’s most valuable company is set to increase its shareholder payout plan by $30 billion.

Facebook Jumps

Shares of Facebook, the world’s biggest online social network, added 3.7 percent after hours, having fallen 2.7 percent during the trading day. The company reported better- than-estimated sales and profit for the first quarter and said Chief Financial Officer David Ebersman will leave.

“The markets are taking these earnings well if you look at after-hours trading for both Apple as well as Facebook. They’re higher than where they closed,” Erik Davidson, San Francisco- based deputy chief investment officer for Wells Fargo Private Bank, which oversees $170 billion, said by phone. “There have been questions with the economy stumbling along, but this could be a spark as we move further into earnings season.”

Japanese exporters declined as the yen rose 0.1 percent against the dollar. Toyota dropped 1.4 percent to 5,469 yen. Sony Corp., the maker of Bravia televisions and PlayStation game consoles, sank 3.1 percent to 1,859 yen. Panasonic Corp., Japan’s biggest maker of consumer electronics, fell 1.8 percent to 1,111 yen.

Hyundai Profit

Hyundai Motor Co. fell 1.2 percent to 242,000 won in Seoul. South Korea’s largest automaker reported first-quarter profit that missed analyst estimates as a stronger won eroded export earnings.

Kansai Electric slipped 4.2 percent to 884 yen. Restarting its nuclear plants will take a long time as the utility needs to review earthquake standards before it can reactivate the facilities, the utility said today.

Apple suppliers advanced. Catcher Technology jumped 6.5 percent to NT$263 in Taipei. Largan Precision rose 3.8 percent to NT$1,755. Samsung Electronics Co., both a competitor and a supplier to Apple, added 1.3 percent to 1.407 million won in Seoul.

Gome Electrical Appliances Holding Ltd. jumped 4.9 percent to HK$1.50 in Hong Kong, its highest close since April 2012, after saying it expects quarterly profit to more than triple.

--With assistance from Joseph Ciolli in New York and Yoshiaki Nohara in Tokyo.