Asia Stocks Outside Japan Cap Worst Weekly Run Since 2011

Asian stocks outside Japan fell this week, with the regional benchmark index slumping to its longest losing streak in two years, amid concern that U.S. stimulus is nearing an end and that a cash crunch in China is worsening.

Samsung Electronics Co., a mobile-phone maker that gets 29 percent of its sales in the Americas, lost 3.2 percent in Seoul. Agricultural Bank of China Ltd. slumped 8.6 percent in Hong Kong as China's money-market rates reached record highs before retreating June 21. Japan's Topix index snapped a four-week slide as the yen posted five straight days of decline against the U.S. dollar for the second time this year.

The MSCI Asia Pacific excluding Japan Index fell 4.5 percent to 420.30 this week, the biggest drop since May last year. The MSCI Asia Pacific Index, which includes Japanese shares, plunged 4.1 percent on June 20, the most since March 15, 2011, after Federal Reserve Chairman Ben S. Bernanke said the U.S. central bank may cut stimulus this year.

"You tighten before the economy shows actual signs of strengthening and that means you are adopting a tighter monetary policy," said Khiem Do, Hong Kong-based head of Asian multi-asset strategy at Baring Asset Management Ltd., which oversees about $51 billion. "If the economy in the U.S. is truly strong, then earnings will be strong, too. But that's not the case. That's why the market is falling."

Relative Value

The MSCI Asia Pacific Index has retreated 12 percent from the closing level on May 20, which was the highest since June 2008. Asia's benchmark trades at 12.3 times average estimated earnings, compared with multiples of 14.4 for the Standard & Poor's 500 Index (SPX) and 12.4 for the Europe STOXX 600 Index, according to data compiled by Bloomberg.

A gauge of energy companies had the biggest declines in the Asia-Pacific benchmark this year amid concern that China's fuel demand will drop as growth slows. A measure of consumer discretionary companies has led gains.

Hong Kong's Hang Seng Index (HSI) declined 3.4 percent, extending its run of weekly losses to six, the longest streak since the global financial crisis of 2008. China's Shanghai Composite Index dropped 4.1 percent, and a gauge of mainland firms listed in Hong Kong retreated 4.5 percent.

A preliminary reading of China's manufacturing released June 20 by HSBC Holdings Plc (HSBA) and Markit Economics showed contraction in the sector is accelerating more than expected. Overnight borrowing costs for banks neared 13 percent as China's government attempts to force country's financial sector to improve credit quality.

'Some Pain'

"We see a lack of recovery momentum in China," Tai Hui, Hong Kong-based chief Asia market strategist at JPMorgan Asset Management, which oversees about $1.5 trillion globally, said in a Bloomberg TV interview. "What's happening in China with the data as well as the liquidity squeeze have added to uncertainty. The government and central bank are willing to let the economy go through some pain."

South Korea's Kospi Index lost 3.5 percent. Australia's S&P/ASX 200 Index retreated 1.1 percent. Singapore's Straits Times Index slipped 1.2 percent. Taiwan's Taiex Index dropped 1.8 percent. Jakarta's Composite Index tumbled 5.2 percent.

The yen's drop brightened the outlook for exporters. Toyota Motor Corp. (7203), the world's biggest carmaker, added 4.5 percent to 5,840 yen. Honda Motor Co., an auto manufacturer that gets 83 percent of its revenue outside Japan, added 3.9 percent to 3,580 yen.

Global Rout

Global shares tumbled after Bernanke said on June 19 that the Fed will probably taper its $85 billion in monthly bond buying later in 2013 and halt purchases around mid-2014 as long as the world's largest economy attain sustainable growth in line with projections from the central bank.

Exporters outside Japan dropped. Samsung, the world's biggest maker of smartphones and the second-heaviest weighted stock on the Asia-Pacific measure, lost 3.2 percent to 1.325 million won. Li & Fung Ltd. (494), a supplier of toys and clothes to Wal-Mart Stores Inc., declined 5.2 percent to HK$10.64. Techtronic Industries Co. (669), a maker of power tools that gets 73 percent of its sales in North America, dropped 2 percent to HK$18.22.

China's one-day and seven-day repurchase rates touched record highs on June 20, stoking concern the nation's credit crunch is worsening.

Chinese lenders plunged. Agricultural Bank of China dropped 8.6 percent to HK$3.08 in Hong Kong. Bank of Communications Co. slid 5.4 percent to HK$5.22. Industrial & Commercial Bank of China Ltd., the world's biggest lender by market value, slumped 8.9 percent to HK$4.62. The stock rose yesterday for the first day this month.

Galaxy Falls

Galaxy Entertainment Group Ltd. (27) dropped 5.9 percent to HK$39.35 in Hong Kong. JPMorgan Chase & Co. cut its rating to neutral from overweight on the Macau casino operator founded by billionaire Lui Che Woo.

Nomura Real Estate Office Fund Inc. (8959), part-owned by Japan's No. 1 brokerage, slumped 16 percent to 433,500 yen in Tokyo after saying on June 14 it plans to raise 35 billion yen ($358 million) to acquire property and repay debt.

Among stocks that rose, China Mengniu Dairy Co. (2319), the country's largest dairy producer, gained 2.4 percent to HK$27.50 in Hong Kong. The company offered HK$12.5 billion ($1.6 billion) to buy baby-food maker Yashili International Holdings Ltd. amid surging mainland demand for infant formula.