Asia Stocks Fall As Debt Crisis Undermines Greece, Itay Leaders

Greek riot police attack civil servants who held national demonstrations on April 22, 2010 against the financial slump brought on by the world capitalist crisis. The financial institutions have worked out a package that is unacceptable to the workers., a photo by Pan-African News Wire File Photos on Flickr.

Asia Stocks Fall as Debt Crisis Undermines Greece, Italy Leaders

November 06, 2011, 11:41 PM EST
By Jonathan Burgos and Yoshiaki Nohara

Nov. 7 (Bloomberg) -- Asian stocks fell after Greek Prime Minister George Papandreou agreed to step down and as Italian Prime Minister Silvio Berlusconi struggled to keep his majority ahead of a crucial parliamentary vote tomorrow.

Westpac Banking Corp., Australia’s second-biggest lender by market value, slipped 1 percent on speculation Europe’s failure to contain its debt crisis will threaten bank earnings. Takeda Pharmaceutical Co. declined 2.1 percent after the Japanese drugmaker slashed its full-year profit outlook. Cnooc Ltd. dropped 2.1 percent after the Chinese oil explorer’s planned purchase of BP Plc’s stake in Argentine crude producer Pan American Energy LLC collapsed.

The MSCI Asia Pacific Index lost 0.3 percent to 119.84 as of 1 p.m. in Tokyo, with about three shares falling for every two that rose on the gauge. The measure sank 3.6 percent last week, the most since Sept. 23, after Greece announced plans to hold a referendum on Europe’s rescue package. Prime Minister George Papandreou agreed to step down to allow the creation of a unity government that will help secure international aid.

“It might get worse before it gets better,” Binay Chandgothia, Hong Kong-based portfolio manager at Principal Global Investors said in an interview on Bloomberg Television. “If you look at the experience in the last 12 to 18 months in Europe, the crisis brings out the right solutions. The way they are going to move is one step forward, two steps backward. We have to live with this.”

Japan’s Nikkei 225 Stock Average lost 0.4 percent. Hong Kong’s Hang Seng Index slipped 0.2 percent, while China’s Shanghai Composite Index dropped 0.3 percent. South Korea’s Kospi Index retreated 0.3 percent and Australia’s S&P/ASX 200 fell 0.6 percent. Markets in India, Malaysia, Philippines and Singapore were closed for holidays.

No IMF Agreement

Futures on the Standard & Poor’s 500 Index swung between gains of as much as 0.6 percent and losses of as much as 0.3 percent. In New York, the index fell 0.6 percent on Nov. 4 as the Group of 20 nations’ failure to agree on increasing the International Monetary Fund’s resources to fight Europe’s debt crisis offset a drop in the U.S. unemployment rate.

The refusal of major economies to offer more aid reflected irritation with Europe’s failure to resolve its crisis and foiled investor hopes that the summit would mark a turning point. The turmoil instead flared again with Berlusconi’s allies pressuring him to step aside as the contagion from the region’s sovereign-debt crisis pushed Italy’s borrowing costs to euro-era records.

‘Wait for Clarity’

“It’s an opportunity to sit back and wait for clarity in terms of how governments and investors are going to approach the European situation,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne.

Financial stocks were the biggest drags on the index as Papandreou and Antonis Samaras, the leader of the main opposition party, prepared to meet today to decide who will be the head of the new government, according to an e-mailed statement from the office of President Karolos Papoulias in Athens. Papoulias will also host a meeting of all political party leaders today.

Westpac dropped 1 percent to A$21.06 in Sydney. Macquarie Group Ltd., the Australian investment bank that gets 16 percent of revenue from Europe, fell 1.3 percent to A$23.05.

The MSCI Asia Pacific Index declined 13 percent this year through Nov. 4, compared with a 0.4 percent drop by the S&P 500 and a 13 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 13 times estimated earnings on average, compared with 12.6 times for the S&P 500 and 10.3 times for the Stoxx 600.

Takeda, Kirin

Of the 433 companies that reported results on the Asian benchmark index since October 11, 206 missed analysts’ estimates, while 151 exceeded expectations, according to data compiled by Bloomberg.

Takeda Pharmaceutical dropped 2.1 percent to 3,430 yen in Tokyo. The company cut its full-year net income forecast by 32 percent to 170 billion yen ($2.18 billion) on costs related to the acquisition of Swiss rival Nycomed in September.

Kirin Holdings Co., Japan’s biggest beverage maker, sank 3.2 percent. The company lowered its full-year net-income forecast by 48 percent, citing securities losses and impairment of fixed assets. Separately, the maker of Kirin Lager, agreed to buy out shareholders in Brazilian beermaker Schincariol Participacoes e Representacoes, completing its biggest acquisition as it seeks growth in emerging markets.

Cnooc fell 2.1 percent to HK$14.94. The company’s deal to buy BP’s $7.1 billion stake in Pan American Energy collapsed, 10 days after Argentina’s president ordered oil companies to repatriate export revenue.

The failure of the deal to buy Argentina’s biggest oil exporter means Cnooc may struggle to meet its production growth targets next year, according to Gordon Kwan, Mirae Asset Securities Ltd.’s head of regional energy research in Hokirinng Kong.

Japan Bourse Merger

Among stocks that advanced, Osaka Securities Exchange Co. surged 8.1 percent to 394,500 yen in Tokyo. The Nikkei newspaper said Tokyo Stock Exchange Group Inc. has entered late-stage takeover talks to buy the bourse operator next year, uniting Japan’s largest markets.

TSE, a privately held company which runs the main venue in the world’s third-largest equity market, would offer to buy as much as 66 percent of Osaka, Nikkei said. Both companies said in separate statements that no decision has been made.

“From the point-of-view of efficiency, it makes sense for the OSE and TSE to bring their respective strengths in derivatives and stocks to a merger,” said David DeGraw, a director in electronic trading services for Daiwa Securities Capital Markets Co. in Tokyo. “A merger would reduce IT costs in the long-term if the exchanges decide on a unified trading platform.”

--With assistance from Eleni Himaras in Hong Kong. Editors: John McCluskey, Nick Gentle

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net