Asian stocks fell for the third week in a month after the US Federal Reserve increased its discount rate for the first time in more than three years, and as companies reported declining earnings.
Aluminum Corp of China Ltd (中國鋁業), China’s biggest producer of the metal, slumped 4.3 percent in Hong Kong on concern demand will wane as stimulus policies are withdrawn around the world. Qantas Airways Ltd plunged 6.2 percent as first-half profit tumbled. Toyota Motor Corp declined 4.6 percent in Tokyo on concern the automaker will face further recalls. Sumitomo Corp, Japan’s third-largest trading company, sank 7.4 percent after offering to increase its stake in a cable-television company.
“If people think the Fed assumes the US economy is resilient enough for a rate hike, they will start to expect stimulus measures to be withdrawn,” said Yuuki Sakurai, Tokyo-based chief executive of Fukoku Capital Management Inc, which manages the equivalent of US$7.5 billion. “That will be bad for markets.”
The MSCI Asia-Pacific Index declined 0.9 percent to 115.33 last week. The index has lost about 9 percent from a 17-month high on Jan. 15 on speculation central banks will tighten monetary policy, and that Greece, Spain and Portugal will struggle to curb deficits.
Japan’s TOPIX index fell 0.4 percent this week after the nation said deflation accelerated. Hong Kong’s Hang Seng Index fell 1.9 percent in a week shortened by the holiday for the Lunar New Year. China’s markets were closed all week.
Australia’s S&P/ASX 200 Index gained 1.6 percent. Westpac Banking Corp, Australia’s second-biggest lender, soared 9.7 percent in Sydney after profit climbed 33 percent. CSL Ltd, the only influenza-vaccine maker in the Southern Hemisphere, jumped 9.6 percent as first-half profits beat estimates.
The MSCI Asia-Pacific Index surged 34 percent last year as governments worldwide boosted spending and central banks lowered interest rates to help restore economies battered by the global recession. The gauge has fallen about 4 percent this year on signs governments from China to the US and India will tighten lending and withdraw stimulus policies.
This week’s drop sent shares on the index to 18 times estimated earnings on average, the lowest since February last year.
“People have a strong appetite for bargain-hunting and can see bright prospects for higher share prices,” said Yoshihiro Ito, senior strategist at Okasan Asset Management Co, which oversees the equivalent of US$8 billion. “Continued improvement in the global economy is supporting the market, though uncertainties won’t be easily cleared.”
Aluminum Corp slumped 4.3 percent to HK$7.13. Rio Tinto Group, the world’s third-biggest mining company, dropped 1.3 percent to A$71 (US$63.81). Esprit Holdings Ltd, a Hong Kong-based global clothing retailer, retreated 5.8 percent to HK$54.30 (US$6.99). Li & Fung Ltd (利豐), which gets about 62 percent of its sales from the US, fell 0.9 percent to HK$35.10.
The US Federal Reserve Board lifted the discount rate charged to banks for direct loans by a quarter point to 0.75 percent on Thursday, saying the change was intended as a “further normalization” of the Fed’s lending facilities.
The move marks another step in a gradual retreat from the central bank’s unprecedented actions to halt the deepest financial crisis since the Great Depression. It has provided hundreds of billions of dollars in credit to banks, bond dealers, commercial-paper borrowers and troubled financial institutions.
“The US has started moving towards the exit of stimulus measures,” said Kenichi Hirano, general manager and strategist at Tokyo-based Tachibana Securities Co. “Though it’s necessary, the move is making investors jittery and is a short-term negative for the market.”
Qantas plunged 6.2 percent to A$2.74 this week. Australia’s biggest airline said it would scrap first-class cabins on most routes after a slump in demand for its most expensive seats led to a 72 percent drop in first-half profit. Sims Metal Management Ltd, the world’s largest recycler of scrap metal, sank 11 percent after first-half sales plunged 39 percent on lower prices and reduced shipments.
In Tokyo, Toyota lost 4.6 percent to ¥3,300 (US$36.03). The world’s biggest automaker may add Corolla, the world’s top-selling car, to a record recall list after US regulators began probing the vehicle’s power steering. The company’s executive vice president Shinichi Sasaki said Toyota will recall the car if there is any safety issue.
China’s chip industry is growing faster than anywhere else in the world, after US sanctions on local champions — from Huawei Technologies Co (華為) to Hikvision Digital Technology Co (海康威視) — spurred appetite for homegrown components. Nineteen of the world’s 20 fastest-growing chip industry firms over the past four quarters, on average, hail from the world’s No. 2 economy, data compiled by Bloomberg showed. That compared with just eight firms at the same point last year. Revenue at China-based suppliers of design software, processors and gear vital to chipmaking is increasing at several times the pace of global leaders Taiwan Semiconductor Manufacturing Co
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