By V. Phani Kumar, MarketWatch , Shri Navaratnam and Puja Rajeev
HONG KONG (MarketWatch) — Asian markets ended mostly lower Friday, with stocks in Tokyo sliding a day after Standard & Poor’s cut the country’s sovereign-debt rating, while Indian shares stumbled as automobile and real-estate firms declined over interest-rate concerns.
Weak earnings reports from frontline companies such as Canon Inc. and Kia Motors Corp. also weighed on sentiment.
“Expectations were quite high for earnings, so we are starting to see a gap [between expectations and results] with most companies also cautious about their outlooks,” said Naoteru Teraoka, general manager at Chuo Mitsui Asset Management.
Australia’s S&P/ASX 200 (AU:XJO 4,775, -31.20, -0.65%) gave up 0.7%, South Korea’s Kospi slipped 0.3% and Hong Kong’s Hang Seng index (HK:HANGSENG 23,617, -162.60, -0.68%) declined 0.7%. India’s Sensex (XX:SENSEX 18,396, -288.46, -1.54%) lost 1.6%.
Among the gainers, China’s Shanghai Composite (CN:SHCOMP 2,753, +3.60, +0.13%) rose 0.1% and Taiwan’s Taiex added 0.5%.
Dow Jones Industrial Average (DJIA 11,990, +4.39, +0.04%) futures were down 29 points in screen trade.
In Tokyo, the Nikkei Stock Average (JP:NI225 10,360, -118.32, -1.13%) dropped 1.1%, pressured after ratings agency S&P cut Japan’s long-term credit rating to AA minus from AA, citing the nation’s high debt levels.
Financials in particular dropped sharply, on concern the downgrade will hurt investor sentiment toward banks, which are big holders of Japanese government bonds.
Shares of Mizuho Financial Group (MFG 4.00, -0.03, -0.74%) (JP:8411 162.00, -2.00, -1.22%) lost 1.2% and Mitsubishi UFJ Financial Group (JP:8306 434.00, -12.00, -2.69%) (MTU 5.40, -0.02, -0.37%) shed 2.7%.
But Japanese government bonds recovered after a weak initial response, while the yen retraced some of its overnight losses in New York.
In Friday trade, the March JGB contract was up 0.14 at 139.92 points, while the 10-year JGB yield slipped one basis point to 1.215%.
“The [S&P] downgrade could likely push the government to quicken the tax-system reforms and fiscal reconstruction, which we think would be a JGB-positive but uncertain outcome from the middle- and long-term point of view,” said RuiXue Xu, rates strategist at RBS Securities.
In foreign-exchange trade, the dollar (USDYEN 82.3400, -0.5600, -0.6757%) was at 82.67 yen, slipping back from ¥82.92 late in New York on Thursday, while the euro (EURYEN 113.1500, -0.6900, -0.6063%) was fetching ¥113.24, from ¥113.83. The euro (EURUSD 1.3742, +0.0011, +0.0801%) was changing hands for $1.3697 from $1.3734.
The focus now shifts to the Japanese parliament, where the government is facing an uphill battle to implement budget and tax reforms — issues cited by S&P in cutting Japan’s debt rating, said Yuichiro Harada, senior dealer at Mizuho Corporate Bank in Tokyo.
Tokyo shares, meanwhile, were also dragged by a 3.1% fall in shares of Canon (CAJ 50.85, +0.78, +1.56%) (JP:7751 4,065, -130.00, -3.10%) after the company reported a 12% fall in its net profit for the October-December quarter due to higher sales promotion costs and lower prices of compact cameras.
