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Asian stocks fall amid valuation concerns

Asian stocks fall amid valuation concerns

Asian stocks fell, dragging the MSCI Asia Pacific Index from a one-year high, amid concern a six-month rally had overvalued prospects for an earnings recovery in the region.
Honda Motor Co., which gets 47 percent of its sales in North America, retreated 3 percent in Tokyo on concern the yen's appreciation to a seven-month high against the U.S. dollar will reduce the value of overseas revenue. National Australian Bank Ltd., the nation's biggest by assets, dropped 3.2 percent in Sydney after Treasurer Wayne Swan said unemployment will climb. Santos Ltd., Australia's No. 3 oil producer, sank 3.7 percent as commodity prices declined.
"Expectations may be beginning to moderate regarding the ongoing strength of the recovery," said Tim Schroeders, who helps manage about US$1 billion at Pengana Capital Ltd. in Melbourne. "Investors will be concentrating on discerning real underlying growth in the global economy."
The MSCI Asia Pacific Index sank 1.7 percent to 115.81 as of 3:46 p.m. yesterday in Tokyo after ending last week at its highest level since Sept. 9, 2008. The gauge has climbed 64 percent from a five-year low on March 9 as government stimulus measures worldwide pulled economies out of recession.
Japan's Nikkei 225 Stock Average fell 2.3 percent. Real- estate investor K.K. DaVinci Holdings tumbled 14 percent in Tokyo after saying it wasn't likely to reach agreement on a loan extension. Hong Kong's Hang Seng Index dropped 1.2 percent, led by Li & Fung Ltd., which retreated for a second day from a 15-month high. Australia's S&P/ASX 200 Index declined 1.4 percent.
China's Shanghai Composite Index rose 1.1 percent. Shandong Minhe Animal Husbandry Co. climbed 10 percent, leading gains among poultry producers, after the government announced a probe into U.S. chicken imports.
Futures on the U.S. Standard & Poor's 500 Index dropped 0.9 percent. The gauge dipped 0.1 percent on Sept. 11 even after a report showed the Reuters/University of Michigan preliminary index of consumer sentiment rose more than economists had estimated in September.
U.S. Treasuries rose on speculation declines in Asian stocks and the euro will bolster demand for the safest assets. Philippe Chaumel, a Paris-based money manager at Rothschild & Cie Gestion who beat 94 percent of his peers in the past year, said he's switching investments into so-called defensive stocks.
The MSCI Asia Pacific Index gained 4.4 percent last week, its biggest weekly advance since the period ended July 24. The average price of the gauge's companies has climbed to 24 times estimated net income, up from 15 times at the index's March low.
Profit reports in the region have helped fuel the six-month rally, with 35 percent of the 642 companies in the MSCI Asia Pacific beating analyst predictions in the latest quarter, while 21 percent missed, according to data compiled by Bloomberg. Net income in the latest period still tumbled 47 percent from a year earlier, the data showed.
Honda fell 3 percent to 2,780 yen as the yen appreciated versus the dollar to as much as 90.21 yesterday, a level not seen since Feb. 12. A stronger yen reduces the value of overseas sales at Japanese companies when converted into their home currency.
Sony Corp., the world's second-biggest maker of consumer electronics, dropped 2.4 percent to 2,425 yen. Toyota Motor Corp., which got 31 percent of its revenue last fiscal year in North America, lost 2.6 percent to 3,740 yen.
Japan's large manufacturers expect the yen to trade at an average of 94.85 this year, according to the Bank of Japan's most recent quarterly Tankan survey.
"The current exchange rate will adversely affect companies that base their forecasts on 95 yen per dollar," said Yoshinori Nagano, a senior strategist at Tokyo-based Daiwa Asset Management Co., which oversees the equivalent of US$95 billion. "There aren't a lot of players in the market and that amplifies declines and gains in equities."
In Sydney, National Australia shares dropped 3.2 percent to A$28.10. Australia & New Zealand Banking Group Ltd. declined 3 percent to A$22.01.


Updated : 2021-10-21 00:30 GMT+08:00