Asia Stocks Fall With Metals After China Factory Data; Yen Gains

San Francisco Chronicle

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Jan. 23 (Bloomberg) -- Asian equities slumped, led by Hong Kong shares, the Australian dollar extended declines and metals fell after a private survey unexpectedly showed China's manufacturing contracting.

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Asia Stocks Fall With Metals After China Factory Data; Yen Gains

Rachel Evans and Kana Nishizawa, ©2014 Bloomberg News

Published 10:29 pm, Wednesday, January 22, 2014

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Jan. 23 (Bloomberg) -- Asian equities slumped, led by Hong Kong shares, the Australian dollar extended declines and metals fell after a private survey unexpectedly showed China’s manufacturing contracting. The yen rose against its major peers.

The MSCI Asia Pacific Index dropped 1 percent as of 2:18 p.m. in Tokyo, while a measure of Chinese shares in Hong Kong slid 2 percent. Standard & Poor’s 500 Index futures erased a gain to fall 0.3 percent. The Aussie weakened 0.5 percent versus the dollar and 0.7 percent against the yen. The greenback is heading for its longest winning streak in 20 months against leading counterparts. Nickel and tin were at least 0.6 percent lower and gold headed for a third straight loss.

Chinese factory output may contract this month, a preliminary survey from HSBC Holdings Plc and Markit Economics signaled today as the People’s Bank of China added further funds to the financial system to ease a cash shortage. Toyota Motor Corp. unveils its 2014 sales target in Tokyo while the World Economic Forum continues in Davos. In the U.S., where manufacturing data, jobless claims and home-sales numbers today may back the case for further reductions in Federal Reserve stimulus, McDonald’s Corp. and Microsoft Corp. report earnings.

“People are worrying about China’s credit crunch and slowdown and they will take any slice of negative news on slow growth as a reason to sell,” said Benjamin Tam, a Hong Kong- based portfolio manager at IG Investment Ltd., which oversees about $1.5 billion. “Slower growth is now the market consensus. People are watching whether the government can restore market confidence on sustainable growth.”

Repo Auction

The HSBC/Markit January flash purchasing managers’ index for China came in at 49.6, missing the 50.3 median estimate of 19 analysts surveyed by Bloomberg ahead of the release. The gauge dropped from 50.5 in December; a reading of 50 is the threshold for expansion.

The People’s Bank of China conducted 120 billion yuan ($19.8 billion) of 21-day reverse-repurchase agreements today, it said on its website. The central bank had already injected 255 billion yuan as it attempts to curb soaring rates in the country. The seven-day repurchase rate, a gauge of interbank funding availability, jumped 153 basis points on Jan. 20.

“Growth in China isn’t going to pick up as the government is focused on rebalancing the economy and reducing reliance on credit,” Manpreet Gill, a Singapore-based senior investment strategist at Standard Chartered Bank, said by phone. “While Chinese equities look inexpensive, they lack catalysts. Ongoing reforms in China will be a key challenge for markets this year.”

Relative P/E

Hong Kong’s Hang Seng Index lost 1.4 percent while the Shanghai Composite slid 0.5 percent. The Shanghai gauge trades at 7.9 times estimated earnings, down from a five year average of 13.5 times projected profit, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index trades at 6.8 times estimated earnings in Hong Kong versus 13.1 times for MSCI’s Asia-Pacific gauge. Stocks in Tokyo swung between gains and losses.

The yen gained 0.1 percent against the U.S. dollar and the euro. Japan’s bonds rose after a 1.2 trillion yen ($11 billion) auction of 20-year government debt attracted record demand.

The Aussie fell against its 16 major peers. Growth in China, the South Pacific nation’s biggest export market, will likely drop to 7.5 percent after expanding 7.7 percent last year, according to an International Monetary Fund report this week.

“China’s growth outlook is posing a risk to countries like Australia that rely on trade with the nation,” said Hideki Shibata, a senior interest-rate and currencies strategist at Tokai Tokyo Research Center Co.

Greenback Streak

The Bloomberg Dollar Spot Index rose 0.1 percent, an eighth straight increase, on speculation improvement in the U.S. economy will encourage the Federal Reserve to dial back stimulus when policy makers meet next week. Fed members voted in December to trim bond buying by $10 billion a month.

South Korea’s won led declines in emerging-market currencies as it slumped to a two-month low. Malaysia’s ringgit weakened 0.3 percent while Indonesia’s rupiah fell to the lowest level in almost two weeks. Thailand’s baht slid the most in a week as anti-government protests that began late October show no sign of abating.

Gold dropped to a two-week low, heading for the longest losing streak in a month, as platinum slipped 0.4 percent.

Rubber extended losses for a fifth day to the lowest in five months amid speculation that Chinese demand may weaken. Industrial metals retreated. Nickel retreated 0.7 percent, while tin and zinc lost 0.6 percent in London.

West Texas Intermediate crude fell for the first time in four days.

--With assistance from Emma O’Brien in Wellington and Weiyi Lim, Jonathan Burgos and Masaki Kondo in Singapore. Editors: Nick Gentle, Richard Frost

To contact the reporters on this story: Rachel Evans in Hong Kong at revans43@bloomberg.net; Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2
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Asia Stocks Fall With Metals After China Factory Data; Yen Gains