Asian stocks fall on lower commodity prices

Asian stocks fell as lower commodity prices and reports of declining profits raised concern that an 11-day rally had overvalued corporate earnings prospects.

Rio Tinto Group, the world’s No. 3 mining company, lost 2.4 percent in Sydney, following a slump in copper prices. China Petroleum & Chemical Corp., Asia’s biggest oil refiner, sank 5 percent in Hong Kong as the Chinese government cut gasoline prices. Shimano Inc., Japan’s No. 1 maker of bicycle components, and DeNA Co., which operates auction Web sites, slumped more than 5 percent after posting lower earnings.

The MSCI Asia Pacific Index , lost 0.6 percent to 109.84 as of 1:22 p.m. in Tokyo, with two stocks falling for each one that rose. The gauge had climbed 13 percent in the past 11 days, the longest winning streak since January 2004.

“Whenever we see the market and companies move up too quickly, that will induce a correction,” said Takeshi Osawa, a senior fund manager in Tokyo at Norinchukin Zenkyoren Asset Management Co., which oversees about $10 billion.

Japan’s Nikkei 225 Stock Average was little changed, while Hong Kong’s Hang Seng Index slumped 1.7 percent. China Cosco Holdings Co., the world’s biggest operator of dry-bulk ships, sank 5.9 percent in Hong Kong after forecasting a loss.

Among stocks that advanced today, JFE Holdings Inc., Japan’s second-largest steelmaker, and Hitachi Ltd., the country’s biggest manufacturer, climbed more than 4 percent on brokerage upgrades. China State Construction Engineering Corp. jumped 65 percent on its first day of trading in Shanghai, while BBMG Corp., the biggest cement supplier in Beijing, surged 58 percent in its Hong Kong debut.

Consumer Confidence

Futures on the Standard & Poor’s 500 Index lost 0.4 percent. The gauge fell 0.3 percent yesterday after the Conference Board’s index of U.S. consumer confidence slid to 46.6 in July, compared with the 49 projected by economists.

The report caused commodity prices to fall. A gauge of six metals in London sank 1.2 percent yesterday, the first decline in 12 days. Copper fell the most in two weeks, while crude oil retreated 1.7 percent to $67.23 a barrel in New York, the first drop in four days.

Rio declined 2.4 percent to A$57.97. Sumitomo Metal Mining Co., Japan’s biggest nickel and gold producer, lost 0.8 percent to 1,453 yen. Jiangxi Copper Co., China’s largest producer of the metal, lost 5.9 percent to 44.03 yuan in Shanghai after saying first-half profit may fall between 57 percent and 64 percent from a year earlier.

Lower Prices

China Petroleum, commonly known as Sinopec, fell 5 percent to HK$6.78. China’s government cut prices on gasoline and diesel by at least 3.3 percent, reversing a trend of rising ceilings. Lower prices reduce profit margins for refiners.

Shimano slumped 4.7 percent to 3,660 yen after profit fell 48 percent in the first half of the year. DeNA tumbled 9.4 percent, the MSCI Asia Pacific Index’s biggest decline, to 288,900 yen after first-quarter net income dropped by 26 percent. KBC Securities Japan downgraded the stock to “sell.”

In Hong Kong, China Cosco sank 5.9 percent to HK$10.92 after saying it expects to post a net loss for the first half of 2009 because the global recession hurt international trade.

“Investors don’t want to actively engage in trading when major companies report results,” said Hiroichi Nishi, an equities manager at Tokyo-based Nikko Cordial Securities Inc. “People have to see whether corporate earnings will start to recover in the second half.”

Japanese Production

Analysts have boosted estimates since the beginning of April for companies in Asia outside Japan, according to data compiled by Bloomberg. Profit forecasts have actually declined within Japan, the data show.

The MSCI Asia Pacific Index rallied 57 percent through yesterday from a more than five-year low on March 9 on rising confidence the worst of the global recession has passed. A government report tomorrow may show Japan’s manufacturers increased production for a fourth month in June, capping the largest quarterly output expansion in more than 50 years.

Federal Reserve Bank of San Francisco President Janet Yellen said yesterday the U.S. economy is showing the “first solid signs” of emerging from the recession and should resume growth later this year.

Companies on the MSCI Asia trade at 24.7 times estimated profit, about double the level at the beginning of this year, as investors bet earnings will recover. The ratio compares with 16.3 times for the Standard & Poor’s 500 Index.

Steelmakers Advance

JFE, the steelmaker that yesterday forecast a return to profit, rose 4.2 percent to 3,700 yen. Takashi Enomoto, an analyst at Bank of America Corp.’s Merrill Lynch & Co. unit, boosted his target price on the stock as exports to China are rising and the shares look cheap based on estimated earnings.

Hyundai Steel Co., South Korea’s biggest maker of construction steel, advanced 4.2 percent to 66,700 won. The company reported second-quarter profit that beat analyst estimates on a stronger won and lower costs.

The “market environment may improve in the second half, helped by increasing demand from the public sector and seasonal demand,” the company said in an e-mailed statement.

Hitachi climbed 5.5 percent to 309 yen. The company reported a 50 billion yen ($529 million) operating loss yesterday, which Nomura Holdings Inc. analyst Masaya Yamasaki said was likely better than the company’s own projection. The shares were boosted to “overweight” at JPMorgan Chase & Co.

Source: Bloomberg