Asian Stocks Decline as Euro Weakens on Growth, Europe Concern

January 02, 2012, 2:42 AM EST By Shiyin Chen and Saeromi Shin

Jan. 2 (Bloomberg) -- Asian stocks declined on the first trading day of 2012, while the South Korean won and the euro weakened on concern that the global economic recovery will be hampered as Europe’s debt crisis enters a new year.

The MSCI Asia Pacific excluding Japan Index slipped 0.4 percent as of 3:08 p.m. in Singapore. Euro Stoxx 50 Index futures retreated 0.4 percent. Financial markets from Japan to the U.K. and the U.S. are closed for a holiday. The won fell 0.3 percent to 1,155.86 per dollar and the euro decreased 0.1 percent to $1.2941. Silver advanced as much as 0.2 percent to $27.8875 per ounce, set for a third day of gains.

Indexes of stocks and commodities had the worst yearly returns since the financial crisis in 2008. South Korea said yesterday export growth will slow this year and Singapore’s government said its economy grew less than previously forecast in 2011. Data today may confirm European manufacturing shrank for a fifth straight month, as regional leaders return to work from the Christmas holidays seeking to buy time to rescue the single currency from fragmentation.

“With many markets closed, it’s hard to make one-way bets especially in the absence of strong leads,” said Lim Chang Gue, a fund manager in Seoul at Samsung Asset Management Co., which oversees about $28 billion. “There’s the ongoing crisis in Europe, and global demand will continue to be generally weak this year. The thing is how much China could provide buffers, but it’s still unclear.”

More than three shares retreated for every one that rose on MSCI’s Asia Pacific ex-Japan Index. Taiwan’s Taiex Index sank 1.7 percent, Indonesia’s Jakarta Composite index dipped 0.3 percent and the BSE India Sensitive Index slid 0.5 percent, a fifth day of losses.

Korea, Singapore

South Korea’s export growth will probably slow to 6.7 percent this year from 19.6 percent in 2011, the Ministry of Knowledge Economy said yesterday. Finance Minister Bahk Jae Wan said the economic outlook will be more uncertain and difficult in 2012 and called for a strengthening of contingency plans to prevent contagion from Europe’s debt crisis.

Separately, Singapore’s Prime Minister Lee Hsien Loong said the island’s gross domestic product rose 4.8 percent in 2011, compared with the government’s earlier forecast of a 5 percent increase, and said the economy will expand 1 percent to 3 percent in 2012. Indonesia said exports grew 8.3 percent in November from a year earlier, slowing from an increase of 16.7 percent the previous month.

Data yesterday showed China’s purchasing managers’ index climbed to 50.3 in December from 49 in November, beating all forecasts in a Bloomberg News survey of 15 economists. A gauge of euro-region manufacturing was 46.9 in December from 46.4 the previous month, according to economists surveyed by Bloomberg News before Markit Economics releases the data today. A reading below 50 indicates contraction.

Europe’s Debt

The euro weakened against 11 of its 16 most actively traded peers. The currency weakened for a second year in 2011 and fell on Dec. 30 below 100 yen for the first time since June 2001. Some 157 billion euros ($203 billion) in debt will mature in the 17-member euro area in the first three months of 2012, according to UBS AG. By the end of that period, leaders have pledged to draft a stricter rulebook for controlling government spending. German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet in Berlin Jan. 9 to work out details.

The Dollar Index, which tracks the U.S. currency against those of six major trading partners, rose 0.1 percent, the first increase in three days. It climbed 1.5 percent in 2011. Treasuries gained 9.78 percent last year, the most since 2008, as investors sought the relative safety of U.S. debt.

‘Wary’ Investors

“Investors are demanding dollars as they are wary of the ongoing European debt crisis,” said Ha Jun Woo, a Seoul-based currency dealer at Daegu Bank in Seoul.

The Institute for Supply Management’s factory index climbed to a six-month high of 53.4 in December, while spending on construction projects advanced 0.4 percent in November, the fourth straight monthly gain, economists surveyed by Bloomberg projected ahead of U.S. reports tomorrow. Payrolls climbed by 150,000 workers after rising 120,000 in November, according to the median forecast of 62 economists in a Bloomberg News survey before Labor Department data on Jan. 6.

--With assistance from Jiyeun Lee in Seoul. Editors: Richard Dobson, Ovais Subhani

To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Saeromi Shin in Seoul at sshin15@bloomberg.net

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net

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