Thursday, March 27, 2008

Credit Losses Push Asian Stocks Down

by Rohan Parker

For the first time in the past five days, Asian stocks have declined; in the lead of those stocks falling is banks and automakers. Fears of the U.S. economy depreciating due to the ongoing credit market turmoil is being touted as the reason for the downward movement in Asian stocks.

As Toyota Motor Corp. receives 37% of their revenues through North American sales, and with the decline in durable-goods orders for the U.S., it is no surprise that Toyota’s stocks have dropped. Banks too are feeling the pinch, with Commonwealth Bank of Australia being in the forefront of those whose stocks are depreciating, which comes on the back of analysts predicting Citigroup Inc. will incur more losses. An unexpectedly low profit earnings from Baoshan Iron & Steel Co., saw the company move down to a eight-month low on the Chinese CSI 300 Index.

The Asia Pacific Index, the MSCI, experienced an 0.8% loss which takes it to 140.29 in Tokyo. There are currently rumors circulating that the U.S. is planning to set a 5.3% benchmark to limit losses received in the credit markets. Though Standard & Poor’s 500 Index is still valued at 20 times reported earnings, the U.S. market has declined so far that it is valued at 14 times now, which is a reduction of 11% for the year.

An analyst in charge of $800 million at KTB Asset Management Co. in Seoul, Kim Hyung Chan, has said that the market is in dire need of a fresh trading strategy, however the overall market data for the U.S. is still not very positive. Chan stated that there where still those requesting further writedowns, however he believed that the need for more stability in that area was of greater concern.

Nearly half of the Asia Pacific’s benchmarks have fallen in the last few days, with Japan’s Nikkei 225 Stock Average falling 0.8% to 12,604.58 and China’s CSI 300 falling 4.2%.

After the Nikkei newspaper reported speculations of Hitachi Ltd. selling their stake in Elpida Memory Inc, the number one computer memory chip maker in Japan took a substantial loss. On the back of the U.S. federal court ruling that Rambus Inc. had won the last phase of a patent suit leveled against Hynix Semiconductor Inc., the South Korean company took heavy losses.

The U.S. markets are also seeing declines, which have pulled Standard & Poor’s 500 index 0.9% lower. Bloomberg analysts predicted that orders for durable goods would increase in February by 0.7%, however they actually declined by 1.7%. New home sales have dropped to a 13 year low.

For every two stocks which made gains on the MSCI Asia Pacific Index today, three made losses, and just one of the 10 industry groups didn’t decline for the days trade.

The stock with the most negative impact on the MSCI today, was Toyota, whose stocks dropped 2.9% to 5,110 yen. The worlds penultimate consumer electronics maker, Sony Corp., incurred a 3.8% loss to 4,070 yen. The company makes 27% of their profits within the U.S.

The company behind 59 shopping malls in the U.S., Westfield Group, saw a reduction of 5.5% to AU$17.58 in Sydney today, whilst the world’s largest contract electronics manufacturer, Hon Hai Precision Industry Co., also saw a reduction of 4% which drew them down to NT$179 in Taipei.

The General Manager of equities - which entails around $2.1 billion - at Amanah Raya-JMF Asset Management in Kuala Lampur, Jason Lee, said that with the figures being released from the U.S. being as bad as they are, concerns over job losses are high and that this will inevitably be bad for the Asian markets as well.

A Bloomberg survey of economists shows that reports are expected of the U.S. which will show 370,000 Americans made first-time claims for unemployment insurance last week.

After fears of a looming U.S. recession have increased, and the rise of the yen against the dollar for a third consecutive day, Japanese exports have also seen a reduction.

 

 

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