Bloomberg : Asian stocks slumped the most in a month amid concerns a credit crunch in China is worsening and after Federal Reserve Chairman Ben S. Bernanke said the central bank may reduce bond purchases later this year should the U.S. economy strengthen.
Industrial & Commercial Bank of China Ltd. dropped 2.5 percent in Hong Kong, pacing declines among Chinese lenders as interbank interest rates climbed and a preliminary survey showed China’s manufacturing is shrinking. Samsung Electronics Co. (005930), the world’s largest smartphone maker, slipped 2.2 percent in Seoul. Inpex Corp., Japan’s No. 1 energy explorer, dropped 3.6 percent as crude oil futures headed for a second day of decline.
Pedestrians with umbrellas walk past an electronic stock board in Tokyo, Japan. Photographer: Junko Kimura/Bloomberg
The MSCI Asia Pacific Index dropped 2.6 percent to 129.62 as of 11:30 a.m. in Tokyo, heading for its biggest loss since May 23 as almost eight shares fell for each that rose. Bernanke said yesterday the central bank may start dialing down its unprecedented bond-buying program this year and end it entirely in mid-2014 if the economy achieves the sustainable growth the Fed has sought since the recession ended in 2009.
“Markets expected asset purchases to continue unabated through at least the end of this year given the recent employment and inflation data,” Keith Poore, Wellington-based head of investment strategy at AMP Capital, which has about $126 billion in assets under management, said by telephone. “That doesn’t look to be the case at the moment, so equities are coming off. Ultimately the tapering should be positive for equities because it’s predicated on a stronger economy, which is good for earnings.”
Japan’s Topix index slipped 0.9 percent, while the Nikkei 225 Stock Average decreased 1.1 percent. South Korea’s Kospi index declined 1.3 percent, while Taiwan’s Taiex index slid 1.2 percent. Australia’s S&P/ASX 200 Index dropped 2 percent, while New Zealand’s NZX 50 Index lost 0.9 percent.
China’s Shanghai Composite Index fell 1 percent as a survey from HSBC Holdings Plc and Markit Economics added to signs of deepening slowdown in the world’s second-largest economy. Hong Kong’s Hang Seng Index slumped 2 percent and a gauge of mainland companies in the city plunged 2.5 percent.
The nation’s one-year interest-rate swap, which is used to exchange fixed payments for the floating seven-day repurchase rate, surged as much as 14 basis points to 4.62 percent, the highest since Bloomberg started tracking the data in May 2006. The seven-day repurchase rate, which measures interbank funding availability, also climbed to a seven-year high.
“There is a credit crunch in the near term,” said Ben Kwong, chief operating officer at Hong Kong-based KGI Asia Ltd. “It’s reflecting the government’s effort to clean up outstanding financial issues. The expectation of a China slowdown is already building up. Few people will be confident that the Chinese government will be able to maintain the 7.5% growth this year unless it introduces some stimulative measures.”
The preliminary reading of 48.3 for a Purchasing Managers’ Index released today by HSBC compares with the 49.1 median estimate in a Bloomberg News survey of 15 economists. May’s final reading of 49.2 was the first below 50 since October, indicating contraction.
Shares on the MSCI Asia Pacific Index yesterday traded at 12.8 times average estimated earnings compared with 14.8 for the Standard & Poor’s 500 Index and 13 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index is trading for 6.9 time projected profit, 26 percent lower than the three-year average.
Futures on the Standard & Poor’s 500 Index fell 0.6 percent, indicating the gauge may extend yesterday’s 1.4 percent retreat, the biggest decline this month.