Asian Stocks Add to Global Rout After China's Slump; BHP Drops
By Stuart Kelly and Chen Shiyin
Feb. 28 (Bloomberg) -- Asian stocks fell the most in more than eight months, extending a global selloff sparked by the biggest plunge in Chinese shares in a decade. BHP Billiton Ltd. and Posco led declines.
In the U.S, the Dow Jones Industrial Average dropped as much as 546 points, the most since the first trading day after the Sept. 11, 2001, terrorist attacks. Chinese stocks yesterday fell the most since 1997 after the government took measures to crack down on excess speculation that had driven shares to records.
``This will reverberate in Asian markets again today,'' said Shane Oliver, who helps manage about $64 billion at AMP Ltd. in Sydney. ``China's market has been poised for a correction for some time, which has made other Asian markets vulnerable too.''
The Morgan Stanley Capital International Asia-Pacific Index fell 3 percent to 144.287 at 9:38 a.m. in Tokyo after rising to a record yesterday. The gauge was set for its biggest drop since June 13. Chinese markets begin trading at 9:30 a.m. in Shanghai.
Japan's Nikkei 225 Stock Average slumped 3.9 percent, set for the biggest drop since June 13. Toyota Motor Co. added to declines after the yen strengthened against the dollar in New York, eroding the value of exporters' sales.
Singapore's Straits Times Index plunged 5.3 percent while Malaysia's Kuala Lumpur composite Index tumbled 8.1 percent, leading declines elsewhere in the region. Stocks in China and Hong Kong may also slide for a second day, after the American depositary receipts of China Mobile Ltd., the world's largest mobile-phone operator by users, slumped 10 percent.
The Dow fell 3.3 percent while the Standard & Poor's 500 Index lost 3.5 percent, wiping out their year-to-date gains. The Nasdaq Composite Index slid 3.9 percent, its steepest drop since July 2002. Europe's Dow Jones Stoxx 600 Index slid 3 percent and emerging markets dropped.
China Tumbles
Shares also fell after U.S. durable goods orders fell 7.8 percent in January, reflecting the biggest slide in business equipment demand in three years, according to figures released yesterday by the Commerce Department in Washington.
China's Shanghai and Shenzhen 300 Index yesterday slumped 9.2 percent, also from a record. It had jumped 13 percent in the previous six sessions. The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, plunged 8.8 percent, the steepest drop since Feb. 18, 1997. The rout wiped out $107.8 billion from the market value of China's companies, which had doubled in the past year.
Stocks fell after the State Council, China's highest ruling body, approved a special task force to clamp down on illegal share offerings and other banned activities in the market.
Commodities Hit
China's government has introduced several measures over the past year to calm the stock market. Banks were urged to stop lending money for stock investments and to recall outstanding loans, the China Banking Regulatory Commission said Dec. 31. The People's Bank of China, the central bank, ordered banks to boost reserves four times in the past year to reduce money available for investment.
``With capital flows being so global it's hard for action in a large country like China not to have an effect on other markets,'' said Amanda Smith, who helps manage $6 billion at ING New Zealand Ltd. in Auckland.
BHP, the world's biggest mining company by market value and production, lost 5 percent to A$27.40. Fiscal first-half sales to China rose 36 percent to $4 billion from a year earlier, the company said. Rio Tinto Group, the second-biggest by market value and third by production, dropped 3.9 percent to A$76.49. It generated 16 percent of its total sales from China in 2006.
`Worry'
``Commodities stocks are the losers because whenever something like this happens, investors worry about the implications for global growth,'' said Tom Murphy, who manages about $1 billion in Asian assets at Deutsche Bank AG in Sydney.
Posco, the world's third-largest steelmaker, slumped 4.3 percent to 356,500 won. China was the company's largest market after South Korea in 2005.
Korea Zinc Co., the world's biggest smelter of the metal, fell 3.8 percent to 90,600 won. Nippon Mining Holdings Inc., Japan's biggest copper producer, dropped 6.8 percent to 972 yen.
Toyota, Japan's largest automaker, dropped 4.1 percent to 8,000 yen. Matsushita Electric Industrial Co., the world's No. 1 maker of consumer electronics, lost 3.5 percent to 2,380 yen, while Sony Corp., the second largest, tumbled 6 percent to 6,130 yen.
The yen rose the most in more than 19 months against the dollar amid a sell-off in U.S. stocks and as investors shunned emerging-market assets, prompting an unwinding of trades betting on a decline in the Japanese currency.
The currency rose 2.3 percent to 117.93 against the dollar late in New York yesterday, the biggest gain since July 2005. It was little changed at 118.15 recently.
China ADRs Slump
``China's drop yesterday shocked risk-money investors, as did the yen's climb,'' said Mitsushige Akino, who oversees about $468 million in assets at Ichiyoshi Investment Management Co. in Tokyo. ``Stocks should fall across the board.''
China Mobile's ADRs fell 10 percent to $44.16 in New York. Its Hong Kong-traded stock yesterday slipped 2.9 percent to HK$74.90. ADRs of China Life Insurance Co., the country's biggest life insurer, fell 8.8 percent to $38.48. The stock fell 3.8 percent to HK$21.65 in Hong Kong yesterday and lost 9 percent to 33.89 yuan on the mainland.
Brilliance China Automotive Holdings Ltd., the Chinese partner of Bayerische Motoren Werke AG, tumbled 12 percent to $24.30 in New York. The stock fell 6.9 percent in Hong Kong yesterday.
Hong Kong's Hang Seng Index yesterday lost 1.8 percent. The Hang Seng China Enterprises Index, which tracks the so-called H shares of 37 mainland companies, fell 3.1 percent.
``It's not just a one-day drop,'' said Andy Mantel, managing director of Pacific Sun Investment Management in Hong Kong. ``There's more room in the downside. My strategy is to increase in cash and shorts.''
To contact the reporter for this story: Stuart Kelly in Sydney
[email protected] ; Chen Shiyin in Singapore at
[email protected]
Source :
www.bloomberg.com
