Asian Stocks, Oil Fall as Chinese Bill Yields Rise; Yen Climbs

By Patrick Chu and Masaki Kondo
Jan. 7 (Bloomberg) -- Stocks retreated in Asia, snapping four days of gains, while oil declined after China, the engine in the global recovery, curbed lending growth. The rate on Chinese three-month bills rose for the first time in 19 weeks.
The MSCI Asia Pacific Index fell 0.3 percent to 123.68 at 5:20 p.m. in Tokyo. The Shanghai Composite Index lost 1.9 percent as the People’s Bank of China offered 60 billion yuan
($8.8 billion) of bills at a yield of 1.3684 percent. The yen fell after new Japanese Finance Minister Naoto Kan said he would like the currency to fall "a bit more." Standard & Poor’s 500 futures fell 0.333 percent. The Dow Jones Stoxx 600 slipped 0.5 percent to 256.58. Oil slid 0.6 percent after 10 days of gains.
Chinese central bankers said yesterday that they would focus on controlling the record expansion in lending and curbing inflation. While growth estimated at 8.5 percent last year led the recovery from the first global recession since World War II, Premier Wen Jiabao said on Dec. 27 that last year’s doubling of new loans had caused property prices to rise "too quickly."
Liu Mingkang, the nation’s top banking regulator, said this week that "structural bubbles threaten to emerge."
"Growth will probably slow this year as tight credit will dampen the demand side," said Zhang Ling, who helps oversee
$7.2 billion at ICBC Credit Suisse Asset Management Co. in Beijing. "That will dash investors’ hope of another year of fast growth."
Five stocks fell for every four that rose on the MSCI Asia Index. Futures for the S&P 500 were down, suggesting the U.S.
stock benchmark will drop for the first time in four trading days. Japan’s Nikkei 225 Stock Average fell 0.5 percent. The Kospi Index sank 1.3 percent in Seoul, where the central bank’s board meets tomorrow to decide on interest rates.

Chinese Banks

China Citic Bank Corp. slid 3.4 percent following the China bill auction results today. Industrial & Commercial Bank of China Ltd., the nation’s biggest lender, dropped 2.4 percent.
Samsung Electronics Co. lost 3.3 percent in Seoul as a stronger won countered the company’s earnings report. LG Electronics Inc. tumbled 7.6 percent on concern profit at the handset business may miss analyst estimates. Korea Zinc Co.
jumped 3.8 percent on higher metal prices. Sumitomo Mitsui Financial Group Inc., Japan’s No. 2 bank by market value, climbed 4.3 percent on optimism a share sale announced yesterday will help the company reduce interest payments.
Oil for February delivery fell 0.4 percent to $82.86 a barrel on the New York Mercantile Exchange, snapping 10 days of gains after a government report yesterday showed an increase in U.S. stockpiles. Prices were near a 15-month high as frigid weather was forecast for China and the U.S., the world’s two biggest energy consumers.

Credit Growth

The sale of China’s government bills at a yield of 1.3684 percent were four basis points higher than at last week’s sale, according to a PBOC statement. The yield on the 2.18 percent treasury note due September 2012 climbed three basis points to
2.45 percent, according to quotes provided by the China Interbank Bond Market. A basis point is 0.01 percentage point.
Credit growth has slowed since July after the bank regulator told lenders to pace their lending to avoid possible asset bubbles. The government has also tightened tax and mortgage rules for second-home purchases.
The Australian dollar, known as the Aussie, rose versus all of the 16 most traded currencies tracked by Bloomberg.
Australia’s dollar rose to 85.18 yen from 84.91 yen in New York yesterday after climbing to 85.55, the strongest since Sept. 29, 2008. Retail sales in Australia 1.4 percent in November, the most in eight months and more than four times the pace forecast by economists in a Bloomberg survey.

Yen Weakens

The yen declined versus all of its 16 major counterparts after Kan said in his inaugural press conference as Japan’s finance minister that he will try to keep the currency at an appropriate level. The dollar strengthened against the euro on concern that the Chinese central bank is preparing to withdraw stimulus measures, curbing demand for higher-yielding currencies.
"It is apparent that Kan won’t tolerate a stronger yen,"
said Keiji Matsumoto, a strategist in Tokyo at Nikko Cordial Securities Inc.
The yen dropped to 92.66 per dollar as of 7:13 a.m. in London from 92.32 yesterday in New York. The currency slipped to
133.32 per euro from 133.01. The dollar rose to $1.4360 per euro from $1.4408.
The cost of protecting Asian corporate and sovereign bonds fell to a two-year low. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan dropped 4 basis points to 86.5 basis points and the Markit iTraxx Australia index fell the same amount to 75.5, both the lowest since Jan. 9, 2008, Citigroup Inc. and CMA Datavision prices show. The Markit iTraxx Japan index declined 5 basis points to 122 basis points, a two- month low, according to Morgan Stanley and CMA prices.