Major Asian indices ended the day in red. The Morgan Stanley Capital International Asia-Pacific Index, which measures the performance of the whole Asian region, declined 0.1% to 152.21. Japan’s Nikkei 225 dropped 0.6% to 16,420.47.Hong Kong’s Hang Seng was one of the few winners with a 0.3% increase to 23,975.40.

The Japanese economy is performing rather poorly and such performance is affecting most of the Asian economies. The homebuilding industry is hit the most since land prices are shooting up. Higher prices, in turn, threaten future profits. Slowing growth of the biggest Asian economy was confirmed yesterday by the Capital Spending Report, published by Japan’s Ministry of Finance. Capital spending declined by 4.9% in the second quarter compared to a 13.6% increase in the first. The reading is even worse at 5.7% when excluding spending on software. Spending in the real-estate sector slumped even more, by 47%, when compared from a year earlier. Shares of Japanese real-estate companies tumbled after the publication was announced. Sekisui House lost 3.7% to 1,425 yen while Mitsubishi Estate Company (biggest developer by market value) declined 1.0% to 3,010 yen. The biggest developer by sales, Mitsui Fudosan, lost 2.7% to 2,900 yen.

Unaffected by the Japanese economic situation is the Hong Kong stock exchange. The China Construction Bank, the second-biggest in the country, plans to throw 9 billion shares on the market. The proposal was sent to the Chinese securities regulator and is under review. Shares of the bank rallied 3.1% to HK$6.71. Developers in China are also doing well. Hang Lung Properties advanced 2.9% to HK$28.85 while the largest develop in Hong Kong, Sun Hung Kai Properties, gained 2.3% to HK$107.40. The outlook for Hong Kong looks very bright. The economy is getting stronger and companies’ earnings are growing.

Adam Narczewski