Asian stocks drop, led by Sony, on global interest rate concern
Sunday, 10 June 2007
SINGAPORE, June 9 (Bloomberg): Asian stocks fell this week, after setting a new high, on concern rising global interest rates will curb spending and investment worldwide. Sony Corp. and DBS Group Holdings Ltd. declined.
"We are moving into a phase whereby long-term interest rates will go a lot higher," said Chua Soon Hock, who manages about $400 million at Asia Genesis Asset Management Pte in Singapore. "You need to be defensive and preserve your capital."
The Morgan Stanley Capital International Asia-Pacific Index this week slid 0.6 per cent to 150.48, snapping two weeks of gains. It had a record close of 153.19 on June 6.
Japan's Nikkei 225 Stock Average slipped 1 per cent, while the broader Topix index dropped 0.7 per cent. Mitsubishi Estate Co. led declines among developers as the yield on Japan's five-year government bonds climbed to a record, fueling concern higher borrowing costs will erode their earnings.
China's CSI 300 Index advanced 0.9 per cent, rebounding after a tripling of the tax on share trades triggered a rout that erased more than $400 billion of market value. Wu Xiaoling, deputy governor of the central bank, said market gains are "inevitable" given the strength of the country's economy.
Australia's S&P/ASX 200 Index closed at a high of 6392.90 on June 4, before sliding over the following four days to end the week down 1.6 per cent. National Australia Bank Ltd. led the drop after a bigger-than-expected jump in employment heightened concern the central bank will raise interest rates to keep inflation in check.
Sony, the maker of the PlayStation game console and Vaio computer, fell 5 per cent to 6,590 yen. Overseas sales accounted for 70 per cent of Sony's income last year. DBS, Southeast Asia's largest bank, slid 4.1 per cent to S$23.20. Westfield Group, which operates 59 malls in the US, lost 2.5 per cent to A$21.12 in Australia.
The yield on the benchmark 10-year US Treasury note rose above 5 per cent for the first time since August on speculation the Federal Reserve will raise its benchmark interest rate. Options on the Federal Reserve funds rate show that as of June 6, the odds of an interest-rate increase to 5.50 per cent are at almost 41 per cent. A month earlier, the odds were zero.
In Europe, the yield on benchmark 10-year bunds rose to the highest in more than four years after the European Central Bank raised its benchmark rate on June 6 and signaled another increase is likely. Interest rates in the US, Europe, Australia and the U.K are at six-year highs, while New Zealand's central bank raised its key rate to a record this week.
"The rise in bond yields has the potential to cause further share market weakness," said Shane Oliver, who helps oversee $83 billion at AMP Capital Investors in Sydney. "Higher bond yields are bad news for shares because they improve the attractiveness of bonds relative to shares, they increase the cost of capital for businesses and they may lead to slower economic growth."
Mitsubishi Estate, Japan's second-biggest property developer by sales, dropped 5.3 per cent to 3,600 yen. Mitsui Fudosan Co., the nation's largest, slid 6 per cent to 3,620 yen.
The yield on Japan's 1.2 per cent note due March 2012 reached 1.525 per cent this week, the highest since the bonds were first sold in 2000.
"Rising rates have always been interpreted as a negative for the real estate industry," said Mitsushige Akino, who oversees the equivalent of $470 million at Ichiyoshi Investment Management Co. in Tokyo. "Not only do they have a lot of debt presently, but they will also have to issue new debt in the future, whether it is advantageous or not."
"We are moving into a phase whereby long-term interest rates will go a lot higher," said Chua Soon Hock, who manages about $400 million at Asia Genesis Asset Management Pte in Singapore. "You need to be defensive and preserve your capital."
The Morgan Stanley Capital International Asia-Pacific Index this week slid 0.6 per cent to 150.48, snapping two weeks of gains. It had a record close of 153.19 on June 6.
Japan's Nikkei 225 Stock Average slipped 1 per cent, while the broader Topix index dropped 0.7 per cent. Mitsubishi Estate Co. led declines among developers as the yield on Japan's five-year government bonds climbed to a record, fueling concern higher borrowing costs will erode their earnings.
China's CSI 300 Index advanced 0.9 per cent, rebounding after a tripling of the tax on share trades triggered a rout that erased more than $400 billion of market value. Wu Xiaoling, deputy governor of the central bank, said market gains are "inevitable" given the strength of the country's economy.
Australia's S&P/ASX 200 Index closed at a high of 6392.90 on June 4, before sliding over the following four days to end the week down 1.6 per cent. National Australia Bank Ltd. led the drop after a bigger-than-expected jump in employment heightened concern the central bank will raise interest rates to keep inflation in check.
Sony, the maker of the PlayStation game console and Vaio computer, fell 5 per cent to 6,590 yen. Overseas sales accounted for 70 per cent of Sony's income last year. DBS, Southeast Asia's largest bank, slid 4.1 per cent to S$23.20. Westfield Group, which operates 59 malls in the US, lost 2.5 per cent to A$21.12 in Australia.
The yield on the benchmark 10-year US Treasury note rose above 5 per cent for the first time since August on speculation the Federal Reserve will raise its benchmark interest rate. Options on the Federal Reserve funds rate show that as of June 6, the odds of an interest-rate increase to 5.50 per cent are at almost 41 per cent. A month earlier, the odds were zero.
In Europe, the yield on benchmark 10-year bunds rose to the highest in more than four years after the European Central Bank raised its benchmark rate on June 6 and signaled another increase is likely. Interest rates in the US, Europe, Australia and the U.K are at six-year highs, while New Zealand's central bank raised its key rate to a record this week.
"The rise in bond yields has the potential to cause further share market weakness," said Shane Oliver, who helps oversee $83 billion at AMP Capital Investors in Sydney. "Higher bond yields are bad news for shares because they improve the attractiveness of bonds relative to shares, they increase the cost of capital for businesses and they may lead to slower economic growth."
Mitsubishi Estate, Japan's second-biggest property developer by sales, dropped 5.3 per cent to 3,600 yen. Mitsui Fudosan Co., the nation's largest, slid 6 per cent to 3,620 yen.
The yield on Japan's 1.2 per cent note due March 2012 reached 1.525 per cent this week, the highest since the bonds were first sold in 2000.
"Rising rates have always been interpreted as a negative for the real estate industry," said Mitsushige Akino, who oversees the equivalent of $470 million at Ichiyoshi Investment Management Co. in Tokyo. "Not only do they have a lot of debt presently, but they will also have to issue new debt in the future, whether it is advantageous or not."