Asian stocks dropped, as commodities fell and investors questioned the pace of the economic recovery.
Japan's Nikkei 225 index plummeted 286.78 points, or 2.9%, to end the day back below the 10,000 mark, at 9,752.88.
In Hong Kong, the Hang Seng Index plunged 333.46 points, or 1.8%, to 18,186.50.
PetroChina Co., China’s biggest oil producer, sank 2.6% in Hong Kong and Rio Tinto Group, the world’s third- largest mining company, lost 3% in Sydney as oil and copper fell. Toyota Motor Corp., the number-one automaker worldwide, declined 3.4% after the yen strengthened and a New York manufacturing report missed estimates.
Konica Minolta Holdings Inc. slumped 6.6% in Tokyo after Credit Suisse Group AG downgraded the printer maker. Australia’s Nufarm Ltd., which supplies farm chemicals, sank 12% after cutting its profit target. Among stocks that rose today, Macquarie Communications Infrastructure Group surged 26% after receiving an increased takeover bid.
Cnooc Ltd., China’s largest offshore oil producer, dropped 5.5%. Rio Tinto slumped 3%. BHP Billiton Ltd., the world’s biggest mining company, fell 1.5%.
Meantime, many of Asia's biggest companies have been mostly ignored in the recent stock market rally, as rising risk appetite sent investors piling into smaller companies, a pattern that marks this stock market rebound as unusual, analysts said.
For the most part, action since March in stock markets in Asia, excluding Japan, has been concentrated in smaller companies, Citigroup said in a research note published this week.
Large companies, which had fallen to their cheapest valuation in nearly two decades earlier this year, are laggards in the rebound and now offer good value when compared to their smaller counterparts, Citi said.
It estimates the price-to-earning discount between large and small companies at 74% as of June 10, a discount at the higher end of normal boundaries.
Citi said current market conditions were analogous to the 1990s savings-and-loan crisis in the U.S, which saw the Federal Reserve cut interest rates below the real rate. That helped spur a recovery in Asian markets between 1990 and 1993, which in that case was led by larger companies, as capital flowed from the U.S. in search of higher returns abroad.
If valuations of large-capitalization stocks - or those with a market value of $5 billion U.S. or greater - return to normal levels, it could translate into a 46% gain in the median share price of selected Asia companies.
Citi said China Mobile Ltd. could see its share price rise 56% if it reverts to its 10-year price-to-book valuation, while Samsung Electronics Ltd. could see its stock rise as much as 52%.
Hutchison Whampoa Ltd., a ports-to-telecoms conglomerate, was also identified by Citigroup as a laggard and could see its share price rally 45%. Jardine Matheson, a Singapore-listed company whose investments are based mostly Hong Kong, was said to have a share price upside of 64%.
Among others with upside potential were China Railway Construction , Swire Pacific Ltd. , Taiwan Semiconductor Manufacturing Co. and Formosa Plastics, Citi said.
Citi added that utilities, technology and healthcare companies could rise about 45% before matching their historical valuations. It also noted these sectors tend to do better during periods of U.S. dollar strength.
Elsewhere:
China’s Shanghai Composite Index edged off 4.97 points, or 0.2%, to 2,961.22
Singapore’s Straits Times Index lost 28.40 points, or 1.2%, to 2,288.16
South Korea’s Kospi index slid 13.27 points, or 0.9%, to 1,399.15
Taiwan’s Taiex moved 4.75 points, or 0.1%, lower to 6,220.81
New Zealand’s NZX 50 Index deducted 39 points, or 1.4% to 2,786.15
Australia’s S&P/ASX 200 gave back 69.20 points, or 1.7%, to 3,962.50
