By Masaki Kondo and Ian C. Sayson Oct. 31 (Bloomberg) -- Asian stocks posted their biggest weekly drop in almost a month as commodity prices fell and disappointing earnings damped confidence the global economy would sustain a recovery. Mitsui & Co., a Japanese trading company that counts commodities as its biggest source of profit, slumped 6.1 percent. PetroChina Co. lost 8.4 percent in Hong Kong after quarterly earnings dropped. National Australia Bank Ltd. retreated 3.4 percent in Sydney as the lender swung to a loss. Sino Land Co. tumbled 8.2 percent in Hong Kong on concern tighter down-payment requirements for luxury homes will reduce demand. The MSCI Asia Pacific Index lost 2.6 percent to 116.46 this week, its steepest dive since the five days ended Oct. 2, and retreated 1.3 percent this month. The gauge had risen for seven straight months to September on speculation government spending and looser monetary policies would accelerate the global rebound. “Investors are wise to take some of their money off the table,” said Jonathan Ravelas, a strategist at Manila-based Banco de Oro Unibank Inc., which has about $8 billion of assets. “There is a lingering doubt in the market if the corporate earnings we are seeing are being driven by actual demand or is it all because of government stimulus spending.” The Asian stock index rose 1.55 percent yesterday, breaking a three-day losing streak, after separate government reports showed Japan’s jobless rate unexpectedly dropped and the U.S. economy grew faster than economists had estimated. Rising Valuations The Nikkei 225 Stock Average fell 2.4 percent in Tokyo, while Australia’s S&P/ASX 200 Index dropped 4.5 percent. Oil prices fell about 1 percent before Asian stock markets closed for the week, the first weekly drop this month. The Hang Seng Index retreated 3.7 percent after the Hong Kong Monetary Authority raised deposit levels for luxury apartments on Oct. 23. Among stocks that gained, Honda Motor Co., Japan’s No. 2 automaker, climbed 2.7 percent after almost tripling its full- year profit forecast. Asian equities have surged 65 percent from a five-year low on March 9, lifting their valuations and raising concern the stock market has outpaced improvements in company earnings. Stocks on the MSCI Asia Pacific Index trade at 23 times estimated earnings for this year on average, up from 17 times at the beginning of this year. This month, reports showed China’s exports slowed their decline and U.S. service industries grew for the first time in a year. Amid signs the global economy is strengthening, Australia’s central bank unexpectedly raised its benchmark rate on Oct. 6 and has signaled further increases in coming months. Emerging ‘Doubt’ “There is a doubt as to whether the fundamentals of the global economy and company earnings will improve as fast as share prices indicate,” said Hisakazu Amano, who helps oversee the equivalent of $19 billion at T&D Asset Management Co. in Tokyo. “It seems to me that the stock market is ahead of an actual fundamental improvement.” Mitsui, Japan’s No. 2 trading house, dived 6.1 percent to 1,223 yen. BHP Billiton Ltd., the world’s biggest mining company, sank 6.8 percent to A$37.45 in Sydney. PetroChina, the country’s largest oil and gas producer, lost 8.4 percent to HK$9.60 after posting a 24 percent drop in third-quarter profit. Oil prices fell as much as 3.1 percent before paring the decline as American consumer confidence unexpectedly dropped and a U.S. Energy Department report showed gasoline stockpiles increased. A gauge of six metals slipped 0.3 percent to Thursday in London after a 5.7 percent gain the previous week. Bad Debts National Australia Bank, the country’s biggest corporate lender, slid 3.4 percent to A$29.85. The bank posted a net loss in the second half owing to swelling charges for bad debts. Commonwealth Bank of Australia dived 7.1 percent to A$52.25, the sharpest weekly slump since the five days ended Aug. 21. Sino Land slumped 8.2 percent to HK$15.06. Sun Hung Kai Properties Ltd., the world’s largest developer by market value, slipped 2.1 percent to HK$119.70. The Hong Kong Monetary Authority said on Oct. 23 that buyers of homes costing more than HK$20 million ($2.58 million) can borrow as much as 60 percent of the property’s value, down from 70 percent previously. Honda, which gets 47 percent of its sales in North America, jumped 2.7 percent to 2,880 yen. The Tokyo-based company boosted its annual net-income target to 155 billion yen ($1.7 billion) in the year to March, compared with the earlier projection of 55 billion yen, on increasing demand for fuel-efficient vehicles in China and Japan. U.S. Growth Government incentives spurred consumers to spend more on homes and cars, helping the U.S. economy grow 3.5 percent from July through September, a Commerce Department report showed on Oct. 29. Economists had estimated a 3.2 percent expansion. “Earnings might be good now, but that’s looking to the past, and everyone is more worried about the uncertain future,” said Hiroshi Morikawa, a senior strategist at MU Investments Co., which manages the equivalent of $14 billion. “The thought is starting to creep into people’s minds that once stimulus measures run out, the recoil will run rather deep.” U.S. stocks will “drop painfully from current levels,” in the coming year amid disappointing economic data and profits as margins shrink, Jeremy Grantham, chief investment strategist at Grantham Mayo Van Otterloo & Co., wrote in a quarterly report. The so-called fair value for the Standard & Poor’s 500 Index is at the 860 level, he said. To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Ian C. Sayson in Manila at isayson@bloomberg.net.

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