Bear Market in China?

From Bloomberg this morning:

China's stocks fell, taking the CSI 300 Index's decline from its Oct. 16 record close to more than 20 percent. Baoshan Iron & Steel Co. led steelmakers lower on speculation U.S. and European Union regulators will impose punitive duties on their Chinese imports.

China Minsheng Banking Corp. and China Merchants Property Development Co. led banks and real-estate companies lower after China Central Television said the government will take measures to slow expansion in fixed-asset investment.

The CSI 300 Index, which tracks 300 yuan-denominated stocks traded in Shanghai and Shenzhen, lost 59.05, or 1.3 percent, to 4,652.10 as of 2:29 p.m. local time, reversing an earlier gain of 1.1 percent. The measure has declined 21 percent since its record close on Oct. 16. Investors consider a 20 percent drop within 12 months as the signal of a bear market.

``Valuations are still very high and we're not quite ready to go back in just yet,'' said Leslie Phang, who helps manage $1 billion at Commonwealth Private Bank in Singapore, and has been reducing holdings of exchange-traded funds that track the Chinese A-share market.

About two stocks declined for each that climbed on the benchmark, with a measure of materials shares the biggest contributor to the drop. The gauge, which has advanced 128 percent this year, is valued at 42 times reported earnings, the highest in Asia, according to Bloomberg data.

China follows Japan among the world's 10 biggest stock markets to enter a bear market since the summer's U.S. subprime- mortgage collapse. The People's Bank of China has raised borrowing costs five times this year and Premier Wen Jiabao pledged last month to limit land use and tighten investment- project approvals.

In Japan....

Japanese stocks fell, led by Sumitomo Mitsui Financial Group Inc., after Wells Fargo & Co. announced a $1.4 billion pretax charge tied to increased losses on home equity loans.

Shares also declined after U.S. consumer confidence fell more than expected in November and housing prices dropped the most since at least 1988, pointing to weaker demand in Japan's biggest overseas market.

Fast Retailing Co. and Mitsubishi UFJ Financial Group Inc. slid after Japan's government lowered its assessment of the job market for the first time in three years.

``It looks like the trend for growing subprime-related losses at U.S. financial institutions is here to stay,'' said Kiyoshi Ishigane, who helps oversee $61 billion in assets at Mitsubishi UFJ Asset Management Co. in Tokyo. ``Japanese banks have declined because of weak domestic demand and as wages and employment stalled.''

The Nikkei slid 69.07, or 0.5 percent, to 15,153.78 at the close of trading in Tokyo. The Topix index slipped 3.14, or 0.2 percent, to 1,475.64.

Bridgestone Corp. led tiremakers and chemical companies higher after the price of oil slumped the most in two weeks, lowering production costs.

Sumitomo Mitsui, Japan's third-largest publicly traded bank, lost 22,000 yen, or 2.4 percent, to 880,000. Mitsubishi UFJ, the biggest, declined 16 yen, or 1.6 percent, to 1,014. T&D Holdings Inc., the nation's only publicly traded life insurer, slid 130 yen, or 2 percent, to 6,260.

Subprime Losses

Wells Fargo, the second-largest U.S. mortgage lender, said after the close of trading in New York it will take a charge to account for expected losses on home-equity loans as the U.S. housing market continues to deteriorate. The company's shares fell 4.7 percent in after-hours trading in New York.

Norinchukin Bank, the central credit provider to Japan's farmers and fishermen, said yesterday it had unrealized losses of 53.3 billion yen ($491.2 million) on 476.7 billion yen of subprime loan-related assets in the six months to Sept. 30.

The bank, which is not traded, had an additional 14 billion yen valuation loss in October on those investments.

``It's still too early to say'' that the credit crisis has passed, said Masafumi Oshiden, a fund manager in Tokyo at BlackRock Japan Co., whose parent company holds $1.1 trillion in assets.

U.S. Consumer Confidence

Toyota Motor Corp., which gets as much as 70 percent of its profit from operations from North America, lost 100 yen, or 1.6 percent, to 6,000. Komatsu Ltd., the world's second-largest maker of construction machinery, dropped 90 yen, or 2.9 percent, to 3,050.

The New York-based Conference Board said yesterday its consumer confidence index fell more than expected to 87.3 in November, the lowest level since 2005, as Americans struggled with surging fuel costs and falling home prices. House values dropped 4.5 percent in the third quarter from a year earlier, the most since records began in 1988, S&P/Case-Shiller reported separately.

Fast Retailing declined 240 yen, or 3.2 percent, to 7,230. J. Front Retailing Co., Japan's largest department store operator, fell 17 yen, or 1.7 percent, to 1,005.

Sales of clothing slid 1.3 percent in October, as mild weather reduced demand for jackets and sweaters, according to a report by the Ministry of Economy, Trade and Industry.

The Cabinet Office toned down its outlook on the job market after the unemployment rate rose for two months. ``Job-market conditions continue to be difficult and there has been a pause in improvement,'' the government said in its monthly economic report for November, published yesterday.

Cheaper Oil

Wages declined in nine of the 10 months to September and mid-year bonuses, about 10 percent of a worker's annual income dropped for the first time in three years.

Bridgestone, the world's second-largest tiremaker, gained 20 yen, or 1 percent, to 2,025. Sumitomo Chemical Co., Japan's No. 2 chemical maker by market value, jumped 30 yen, or 3.4 percent, to 922 yen.

Crude oil for January delivery extended declines for the second day falling 0.7 percent to $93.76 a barrel in the New York. The price fell 3.4 percent yesterday, the biggest drop since Nov. 13.

Oil explorers fell. Inpex Holdings Inc., Japan's biggest petroleum explorer, slid 50,000 yen, or 4.2 percent, to 1.13 million. Japan Petroleum Exploration Co., the second largest, declined 290 yen, or 3.3 percent, to 8,580.

Sony Corp., the world's second-largest consumer electronics maker, rose 190 yen, or 3.3 percent, to 5,940, completing its biggest three-day gain in almost two years after Dubai International Capital LLC said on Nov. 26 it bought a ``substantial'' stake in the company. The stock has advanced 13 percent over three sessions, the most since Jan. 2006.

Nikkei futures expiring in December lost 0.5 percent to 15,160 in Osaka and dropped 0.3 percent to 15,170 in Singapore.