Financial advisers: the Good, the Bad, the Ugly - Marketwatch Financial advisers: the Good, the Bad, the Ugly - Marketwatch

Wednesday, May 23, 2012

Financial advisers: the Good, the Bad, the Ugly - Marketwatch

Financial advisers: the Good, the Bad, the Ugly - Marketwatch

By Steve Beck

Online portfolio management company, Betterment, stirred up quite a controversy this month brashly challenging both the efficacy and ethicality of the investment advisory business in its blog post, "Financial Advisers Are Bad For Your Wealth".

Possibly, it was their stinging criticism of the industry or their use of an image of a pig with a human face that set off the raucous debate.

Whatever the reason, their opinions didn't go unnoticed as wealth managers across the country responded with ire. Wealth manager Josh Brown from New York City characterized the dust-up as a, "brawl between Betterment and the entire online financial advisory population" and financial planner Roger Wohlner called their comments " immature and stupid ," to name a few.

Behind the controversy was a study performed by the National Bureau of Economic Research (NBER). Researchers sought to determine if advisers would act in the best interest of potential clients, correcting risky and inappropriate investment behavior when contacted for help. Actors posing as vulnerable clients performed nearly 800 visits. The study resulted in the discovery that advisers often reinforced harmful investment behavior and provided advice that benefited their personal compensation in lieu of their clients well-being.

For example, when actors asked about fees, advisers played down their importance. Despite the damaging effect of fees on portfolio growth, the study revealed that adviser said things like, "this fund has a 2% fee but that is not much above the industry average."

Actors, who claimed they were in low-cost index funds, were frequently guided into more expensive, actively-managed mutual funds despite the ineffectiveness.

In addition to financial advisers, brokers too were biased toward methodologies that increased their personal earnings, such as encouraging the actors to concentrate in hot industries which require more buying and selling despite the high-risk, and taxes and fees resulting from such churn.

In light of these findings, what then is the role of an investment adviser if any? At MarketRiders, we often help investors fire their high-price adviser in favor of low-cost, global asset allocation using ETFs guided by an objective and proven software service.

This do-it-yourself approach, however, isn't for everyone. Many investors lack the fortitude and stability to faithfully execute a strategy through the tumultuous machinations of the market. For those investors, a good investment adviser makes tremendous sense, but how do you know if your adviser is a good one?

The Good

The first, ultimate and irreplaceable principle that guides good advisory services is fiduciary responsibility. Not only is this the law, good advisers place the interest of their clients above their own simply because they know it is the right thing to do, even if it means passing on substantial and tempting fees.

In addition, good advisers work intimately with their clients to develop a thorough investment plan favoring low-cost indexing, tax efficiency and global diversification when possible.

Finally, good advisers help their clients stay the course, helping clients manage the psychological roller coaster ever-present when markets swing wildly during economic tumult.

The Bad

Bad RIAs and financial planners are those that fail to use low-cost and tax-efficient indexing as the foundation of their portfolio management. Some of these bad advisers are sincere and good people who are simply uninformed and trained by an industry entrenched in an active management ethos.

Their sincerity, however, is no ethical cover for ignorance. Research has conclusively demonstrated the failure of active money management with irritating redundancy. When it comes to an adviser's resistance to accepting these plain facts, it behooves us to remember what Upton Sinclair said: "It is difficult to get a man to understand something when his salary depends on his not understanding it." If your adviser fails to acknowledge the value of indexing, he may not be as good as you think.

The Ugly

The NBER study sadly revealed that some advisers are actually quite ugly and deserving of the ignominious pig image employed in the controversial article. These debauched advisers place their own interests ahead of their clients, transgressing both law and conscience. T

his offense happens when advisers recommend high-price and actively managed mutual funds, products with high fees, and strategies with high risk and taxes all for the sake of their own pocketbook. When you see such recommendations in play, you can be sure the oinking isn't far behind. Leave these ugly ones to themselves before your portfolio has an ugly result. Find a good adviser or use one of the many quality online indexing services now available for surprisingly low-cost.

Stocks rally further in run-up to EU summit - AOL News
MOSCOW -Global stocks enjoyed one of their best days in weeks on Tuesday ahead of a summit of European leaders that's expected to be dominated by calls to boost economic growth.

Europe remains the focus of attention across all financial markets in the run-up to the June 17 Greek election that could go a long way to determining the country's membership of the euro as well as the future of the single currency zone.

On Wednesday, the leaders of the 27 European Union countries will hold an informal meeting in Brussels. The summit is expected to focus on ways to kick start the region's faltering economy.

"There have been lots of comments from various officials regarding the wish of the EU for Greece to remain in the eurozone, the need to agree upon a growth agenda to go alongside the austerity agenda and of course on common euro bonds," said Gary Jenkins, managing director of Swordfish Research.

With that backdrop, stocks have recovered this week after a parlous few sessions.

In Europe, France's CAC-40 closed 1.9 percent higher at 3,084.09, while Germany's DAX rose 1.7 percent to 6,435.60. The FTSE 100 index of leading British shares ended up 1.9 percent at 5,403.28, helped by figures showing that the annual inflation rate dropped to 3 percent in April, its lowest level since February 2010. The International Monetary Fund, however, issued a tough assessment of U.K. economic policy on Tuesday, urging authorities to do more to boost demand in the economy.

In Greece, political uncertainty and a gloomy prediction by the Organization for Economic Cooperation and Development pushed shares on the Athens Stock Exchange to their lowest level in 22 years on Tuesday, 1.6 percent down at 536.

Wall Street also advanced following Monday's gains — the Dow Jones industrial average was up 0.3 percent at 12,543 while the broader S&P 500 index rose 0.6 percent to 1,323.

Europe's debt crisis as well as developments in Greece has the potential to knock the rebound in sentiment witnessed so far this week.

"Markets are by no means out of the woods, however, and much uncertainty will remain ahead of Greece's election in just less than a month," said Mitul Kotecha, head of global strategy at Credit Agricole CIB.

If a new government fails to follow through with an austerity plan agreed to by prior Greek leadership, the country could lose a promised multibillion euro bailout from international lenders. Greece's default could send shockwaves throughout Europe. The OECD's top economist warned on Tuesday that the 17-country eurozone risks falling into a "severe recession" and called on governments and Europe's central bank to act quickly to stop the slowdown spilling over into the global economy.

The organization now forecasts a longer and deeper contraction in the eurozone than in its November report, with the eurozone economy expected to shrink in 2012, and only manage a feeble recovery in 2013.

Earlier, Asian markets posted sizeable gains. Japan's Nikkei 225 index rose 1.1 percent to close 8,729.29 and Hong Kong's Hang Seng added 0.6 percent to 19,039.15. South Korea's Kospi climbed 1.6 percent to 1,828.69.

Hopes that China will announce new measures to boost growth also helped push shares higher. Investors were encouraged by weekend statements from Chinese Premier Wen Jiabao, who promised to spur the world's second-largest economy, a shift from previous rhetoric about curbing inflation.

In the oil markets, benchmark oil for June delivery was down 77 cents at $92.12 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.09 to settle at $92.57 in New York on Monday.

In currencies, the euro slipped to $1.2736 from $1.2793 late Monday in New York. The euro hit a four-month low against the dollar last Thursday. The dollar was up at 79.97 yen from 79.36 yen.—

Pamela Sampson contributed to this report from Bangkok.

Stocks lose steam on Greek exit worries - WMTW

U.S. stocks ended flat Tuesday, after turning sharply lower during the final hour of trading amid fears that Greece will leave the eurozone.

About an hour before the closing bell, reports surfaced that former Greek prime minister Lucas Papademos told Dow Jones Newswires that Greece is considering making preparations to leave the eurozone.

The euro sank on the news, falling more than 1% against the dollar, and pulled stocks down with it.

Earlier, strong U.S. housing data boosted stocks.

"Investors were able to concentrate on what was happening in the U.S., said Kim Forrest, senior equity analyst at Fort Pitt Capital Group. "But I guess Greece came back with a vengeance."

After being up almost 1% earlier in the day, the S&P 500 sank as much as 0.5%. The broad index managed to recover by the closing bell, finishing the day up less than 1 point, or 0.1%.

The Dow Jones industrial average and Nasdaq also tumbled following the Greek news. Both indexes bounced back from their lowest levels of the day but still finished in the red. The Dow slipped 2 points for the day, while the tech-heavy Nasdaq lost 8 points, or 0.3%.

Investors will continue to focus on developments out of Europe.

The region's leaders are due to meet Wednesday in an ad hoc summit to address the latest problems with European sovereign debt, worries that Greece is moving closer to leaving the eurozone, and the contagion effects an exit might have on other economies.

U.S. stocks bounced back from their worst week of the year Monday, on renewed optimism that European leaders would find a way out of the sovereign debt crisis.

Asia stocks tumble; Tokyo slides on BOJ inaction - Marketwatch

By Virginia Harrison and V. Phani Kumar, MarketWatch

HONG KONG (MarketWatch) — Asian markets slumped Wednesday as European concerns bruised sentiment, with stocks in Tokyo deepening losses as the yen strengthened after the Bank of Japan decided against further monetary easing measures.

Japan’s Nikkei Stock Average /quotes/zigman/5986735 JP:100000018 -1.98% , which began the day on a weak note after Fitch Ratings late on Tuesday downgraded its sovereign debt to A+ and issued a negative outlook, lost more ground after the BOJ decision. It ended 2% lower.

Hong Kong’s Hang Seng Index /quotes/zigman/2622475 HK:HSI -1.33%  shrank 1.3%, China’s Shanghai Composite /quotes/zigman/1859015 CN:000001 -0.42%  shed 0.4%, South Korea’s Kospi KR:SEU -1.10%  dropped 1.1%, Australia’s S&P/ASX 200 index /quotes/zigman/1653884 AU:XJO -1.31%  fell 1.3% and Taiwan’s Taiex /quotes/zigman/1565586 XX:Y9999 -1.75% declined 1.8%.

The losses came amid fresh European worries. Former Greek Prime Minister Lucas Papademos reportedly warned that preparations for a Greek exit were being considered, with the remarks coming one day ahead of a informal summit of European Union leaders expected to target options to avoid that outcome. Read preview of European Union summit.

Andrew Sullivan, principal sales trader at Piper Jaffray, said uncertainty over the contagion effect of a possible Greek exit prompted investors’ “fear to outweigh greed.”

“Is it going to just be Greece leaving? … Is it going to be a complete breakup of the euro? That is a huge uncertainty for the market to try to grapple with... People [are] really starting to question if Greece leaves, are the firewalls in place to protect contagion?” Sullivan said.

Amid the downbeat global mood ahead of the EU summit, overseas demand-tied firms weakened across Asia.

In Hong Kong, Li & Fung Ltd. /quotes/zigman/4522657 HK:494 -2.41%  dropped 2.4%, Europe-exposed fashion retailer Esprit Holdings Ltd. /quotes/zigman/38257 HK:330 -2.83% /quotes/zigman/577081/quotes/nls/espgy ESPGY +2.46% lost 2.8% and ports operator Cosco Pacific Ltd. /quotes/zigman/14493 HK:1199 -4.01% /quotes/zigman/528823/quotes/nls/cspky CSPKY %  slumped 4%.

In Seoul, Samsung Electronics Co. /quotes/zigman/189555/quotes/nls/ssngy SSNGY 0.00%  dropped 1.5%, and LG Display Co. /quotes/zigman/352771/quotes/nls/lpl LPL +0.33%  sank 4%.

Bank of Japan holds off

Meanwhile, the Japanese yen moved higher after the Bank of Japan decided not to add any additional easing measures, and left its benchmark interest rate unchanged as expected at a policy meeting on Wednesday. Read more on the BOJ's decision.

That put the already-strained shares of exporters under further pressure. Shares of Hitachi Ltd. /quotes/zigman/193278 JP:6501 +13.42%   /quotes/zigman/193283/quotes/nls/hthif HTHIF +1.36% , Nintendo Co. /quotes/zigman/195848 JP:7974 -2.26% /quotes/zigman/195853/quotes/nls/ntdof NTDOF -2.31%  and Fujifilm Holdings Corp. /quotes/zigman/192939 JP:4901 -2.75% /quotes/zigman/435619/quotes/nls/fujiy FUJIY +0.67%  each dropped 2.8%.

Ahead of Wednesday’s market open, the government reported a disappointing export performance, including a drop in shipments to China, that saw Japan’s trade deficit widen more than expected in April. Read more on Japan’s trade deficit.

Financials were broadly lower in the wake of Fitch’s downgrade. Aozora Bank Ltd. /quotes/zigman/443480 JP:8304 -4.55%  lost 4.6%, and Nomura Holdings Inc. /quotes/zigman/196701 JP:8604 -3.72%   /quotes/zigman/296367/quotes/nls/nmr NMR -0.59%  dropped 3.7%.

Renesas Electronics Corp. /quotes/zigman/326601 JP:6723 -9.00%   /quotes/zigman/593649/quotes/nls/rnecy RNECY -15.14% slumped 9%, losing its 7.4% advance on Tuesday and then some, in the wake of reports that it plans to raise capital.

Resources weak

Losses for resource firms dragged across Asia, pressured by weaker commodity prices overnight including steep drops for copper and oil.

In Sydney, iron-ore miner Fortescue Metals Group Ltd. /quotes/zigman/329628 AU:FMG -5.00% /quotes/zigman/8755765/quotes/nls/fsugy FSUGY -1.59%  skidded 5%. In Hong Kong, Jiangxi Copper Co. /quotes/zigman/16454 HK:358 -1.84% /quotes/zigman/332900/quotes/nls/jixay JIXAY -0.14% fell 1.8% and gold miner Zijin Mining Group Co. /quotes/zigman/2 HK:2899 -2.77% /quotes/zigman/545683/quotes/nls/zijmy ZIJMY -15.03%  dropped 2.8%; in Shanghai, the stocks gave up 1.1% and 1.5%, respectively.

Among energy firms, Cnooc Ltd. /quotes/zigman/29647 HK:883 -0.97%   /quotes/zigman/274848/quotes/nls/ceo CEO -1.57%  gave up 1% in Hong Kong, and Santos Ltd. /quotes/zigman/181202 AU:STO -1.87% /quotes/zigman/569400/quotes/nls/sslty SSLTY -1.07% lost 1.9% in Sydney, as crude-oil futures traded below $92 a barrel in electronic trading.

In the retail sector, shares of Myer Holdings Ltd. /quotes/zigman/571953 AU:MYR -7.83%   plunged 7.8% after the department-store operator reported a slip in quarterly sales and cut its full-year profit estimate.

Stocks in Sydney got little relief from a weaker currency, as the Australian dollar /quotes/zigman/4867876/sampled AUDUSD -0.5553%  fell to 97.54 U.S. cents from 98.02 cents in North American trading late Tuesday, as investors steered away from risky assets. Read more on the Australian dollar.


Victoria 'financial education' firm has another (questionable) deal for you - The Vancouver Sun

In March, I wrote about a Victoria-area financial planning firm that has caused its clients a whole lot of financial grief.

Wealth by Design describes itself as a "financial services education and capital-raising company." It holds seminars and "boot camps" where it purportedly teaches attendees how to become "financially free within 10 years or less."

Not coincidentally, it offers an array of investment products that will purportedly help attendees achieve that goal.

At the time of my column, the firm's chief executive was Stephen McClure, who was supposedly so financially adept that he "became financially free at the age of 32."

I found this puzzling, as many of the investments he recommended were disasters.

One was Merendon Mining, which was part of an alleged Ponzi scheme perpetrated by Milowe Brost and Gary Sorenson, who are now facing criminal fraud charges in Calgary.

Another was a charitable donation tax-deduction scheme called the Canadian Humanitarian Trust, which was disallowed by Canada Revenue Agency.

Yet another was an investment in Ontario-based Borealis International Inc., which was shut down by the Ontario Securities Commission.

With a string of losers like this, I wondered how McClure could have achieved financial freedom at such a young age.

Alas, he confessed, it was all a mistake: he was not "financially free" after all. He had invested in the same deals and had suffered similar losses.

McClure recently told me he was "laid off" as the firm's CEO on April 20, the month after my column was published. One client told me McClure is now claiming to be on the verge of personal bankruptcy.

I wanted to ask Denise Andison - the founder, owner and chief operating officer of Wealth by Design - how her chief executive could sell so many bad investments and make such bogus claims about being "financially free" with no apparent repercussions until he was outed by The Vancouver Sun, but she never returned any of my calls.

Wealth by Design is now promoting another questionable investment offering. It's a Victoria-based company called One World Polymers Corp., which purportedly purchases and ships waste plastic to recycling plants in other countries.

Or at least that's the plan. It's not clear that One World is actually in business. The company was only incorporated in March, which suggests it is still in the development stage. I repeatedly requested a copy of the company's offering memorandum, which would presumably tell the tale, but neither Wealth by Design nor One World responded to my queries.

I am not surprised that neither firm responded. They are not operating at arm's-length. Andison, who runs Wealth by Design, also serves as chief operating officer of One World. Gary Lahnsteiner, who works as a "wealth coach" at Wealth by Design, also serves as chief marketing officer of One World. The two companies also share the same office in Victoria. They are also jointly promoting the investment. In March, they held a dog-and-pony show for about 100 prospective investors at the Grande Pacific Hotel in Victoria. Another investor meeting was held at the Victoria office on April 30.

Money becomes new church battleground - The Guardian

The Rev Paul Perkin seemed bewildered by the question: what was his take on the latest scheme for conservative evangelical churches to withhold money from the rest of the Church of England in order to keep it out of the hands of liberals, gay people or women priests?

"I can't talk about that," he said. "You'll have to ask James Paice." Both men are vicars in south London. And both are directors of the company set up last month to implement this scheme, the Southwark Good Stewards Company. It is the latest, and perhaps the most serious, move in a bitter power struggle within the CofE and the wider Anglican communion.

Not contributing to central funds could represent a serious threat to the rest of the CofE, whose cohesion depends in part on a redistribution of money from rich, largely suburban and middle-class parishes to the inner cities and the countryside where congregations are too small and the buildings too old to be economically sustainable.

Although the Good Stewards Company claims not to be separating from the rest of the CofE, this reading is plausible only if you assume it is the rest of the CofE that has separated from Christianity.

The money will be made available only to churches that commit themselves to a rejection not just of homosexuality, but of liberalism: they must sign "in good faith" a declaration that they will "reject the authority of those churches and leaders who have denied the orthodox faith in word or deed … Pray for them and call on them to repent and return to the Lord." Such people include the present archbishop of Canterbury, Rowan Williams.

The involvement of Perkin in this protest brings it very close to the heart of the institutional church. His is one of the most prosperous and well connected parishes in England: St Mark's, Battersea Rise, in south London, which hosted an international meeting of conservative bishops last month. Apart from encouraging others to hold back money, it is also preparing a network of sympathetic lawyers in case the church fights back.

St Mark's has a long history of financial and political links with conservative churches outside England, but it also stands very close to the central networks of the CofE. Until last year, the church's most senior civil servant, William Fittall, who is the secretary general of its governing body, the General Synod, was a regular worshipper there, a licensed reader who sometimes preached for them.

Before last month's meeting, the congregation were treated to a sermon from the archbishop of Sydney, Dr Peter Jensen, one of the leaders of the conservative movement, who said: "The world has invaded the church. So the contest we have, as Bible-based, Bible-believing Christians, is on two fronts. It is against the world, but it is also against those in the church who have come to terms with the world, who have made their peace with the world, who have compromised with the world, who have given up biblical standards in order to be thought well of in the world."

He warned the congregation they would be vilified, discriminated against, and turned into second-class citizens for their beliefs. "Alas, the truth of the matter is that there are occasions in which the church is being used to persecute the church," he said.

Last year, the evangelical parties blocked the appointment as bishop of Southwark of the two liberal candidates, Jeffrey John, who is gay, and Nick Holtam, who is sympathetic to gay marriage. The compromise candidate, Christopher Chessun, has failed to promote any evangelicals in his first year in office. This month 100 of them demanded, and got, a meeting with the bishop to complain about this.

Even those among conservatives who do not support the financial boycott, and they are a majority, now feel aggrieved at the lack of promotion for evangelicals.

And among the others, the dream of financial independence from the rest of the church has been nurtured for years.

The Rev Richard Perkins, who runs a small independent but still Anglican chapel in Southwark, once blogged: "Why would you give money to a corrupt central administration that'll use it to fund ministries which we oppose? … We shouldn't fund heresy. That's disgraceful."

These tensions are mirrored in the wider Anglican communion, which the conservatives hope to control because they far outnumber the liberal churches of the Anglo-Saxon world. They believe they speak for the true CofE, never mind what the archbishop of Canterbury or the synod may decide. They have set up a body calling itself the Anglican Mission in England.

Five retired English bishops, among them Dr Michael Nazir-Ali, the former bishop of Rochester who was the evangelical candidate for archbishop of Canterbury last time, have promised to act as bishops for those clergy who sign up to the pledge not to accept women bishops or tolerate gay people in the church. It is not at all clear that these arrangements are legal, since the authority of the bishops over their clergy is established by the law of England. But any legal battle would be enormously expensive and time consuming. There is no sign that the rest of the Church of England has the stomach for it.

One crisis is approaching rapidly. This summer the synod must decide whether to accept legislation allowing women to become bishops that will not make special provision for their opponents. The present draft is the product of years of wrangling. If it goes through unamended Nazir-Ali predicts that more clergy will come over to his organisation. They will attempt to leave the rest of the CofE, taking their money and their churches with them – all the while claiming, as their rhetoric already suggests, that it is the rest of the church that has left them.

But if the bishops water down the draft to avoid this open split the other side – a great majority of the church – will probably rebel. Campaigners for women bishops threaten to vote the whole measure down rather than accept amendments that would give them a permanent second-class status. The bishops meet later this month to decide and their space for compromise is vanishingly small.

Asian Stocks Snap Two-Day Rally on Greece, Japan Exports - Bloomberg
Enlarge image Asian Stocks Snap Two-Day Rally on Greece Exit Risk, Japan Trade

Asian Stocks Snap Two-Day Rally on Greece Exit Risk, Japan Trade

Asian Stocks Snap Two-Day Rally on Greece Exit Risk, Japan Trade

Tomohiro Ohsumi/Bloomberg

Pedestrians are reflected on an electronic stock board outside a securities firm in Tokyo, Japan.

Pedestrians are reflected on an electronic stock board outside a securities firm in Tokyo, Japan. Photographer: Tomohiro Ohsumi/Bloomberg

May 22 (Bloomberg) -- David Winters, chief executive officer of Wintergreen Advisors LLC, talks about the outlook for global stocks and his investment strategy. Winters also discusses Facebook Inc.'s initial public offering with Rishaad Salamat, Susan Li, John Dawson and Robyn Meredith on Bloomberg Television's "Asia Edge." (Source: Bloomberg)

May 21 (Bloomberg) -- Marc Faber, the publisher of the Gloom, Boom & Doom report, talks about global stock markets and his investment strategy. Faber also discusses China's economy and Greece's potential exit from the euro area. He speaks with Susan Li on Bloomberg Television's "Asia Edge." (Source: Bloomberg)

Enlarge image Asian Stocks Snap Two-Day Rally on Greece Exit Risk, Japan Trade

Asian Stocks Snap Two-Day Rally on Greece Exit Risk, Japan Trade

Asian Stocks Snap Two-Day Rally on Greece Exit Risk, Japan Trade

Kiyoshi Ota/Bloomberg

Game software titles for Nintendo Co.'s 3DS handheld game consoles are displayed at an electronics store in Tokyo, Japan. Nintendo Co., a maker of video-game players that depends on Europe for a third of its sales, fell 2.4 percent.

Game software titles for Nintendo Co.'s 3DS handheld game consoles are displayed at an electronics store in Tokyo, Japan. Nintendo Co., a maker of video-game players that depends on Europe for a third of its sales, fell 2.4 percent. Photographer: Kiyoshi Ota/Bloomberg

Asian stocks fell, dragging the regional benchmark index to a five-month low, as concerns mounted Europe’s debt crisis is worsening and the Bank of Japan refrained from deploying further monetary stimulus, dimming the outlook for exporters.

Cosco Pacific Ltd. (1199), which operates container facilities at Greece’s Piraeus port, fell 4 percent in Hong Kong. Mitsui & Co. (8031), a Japanese trading company, slid 1.6 percent after the nation’s trade data missed estimates. Quanta Computer Inc. led computer makers lower in Taiwan, dropping 4.2 percent, after bellwether Dell Inc. forecast slower sales. Shanghai Pharmaceuticals Holding Co. slumped 24 percent in Hong Kong on a report regulators are investigating the drugmaker for suspected financial fraud.

The MSCI Asia Pacific Index fell 1.6 percent to 111.91, the lowest level since Dec. 20, as of 7:37 p.m. in Tokyo. Six stocks declined for each one that gained. All 10 industry groups on the measure slid. The gauge has dropped 13 percent from this year’s high on Feb. 29 as political gridlock in Greece following an inconclusive ballot this month revived concerns the nation will abandon bailout conditions and exit the euro zone. Greece is scheduled to have a second election on June 17.

“If Greece does get out of the euro, then that will be a significant event for the market,” said Andrew Pease, Sydney- based chief investment strategist for the Asia-Pacific region at Russell Investment Group, which manages about $150 billion. The market wants to see “a political resolution out of Europe that will either prevent Greece from exiting or, if they do exit, will put in place a strong firewall to prevent contagion effects from going to other countries.”

BOJ on Hold

Japan’s Nikkei 225 Stock Average fell 2 percent, extending losses as the yen rose after the Bank of Japan refrained from further monetary easing today. Trading volume was 13 percent above the 30-day average. The central bank last month increased its asset-purchase program and extended the maximum maturity of government debt it buys in the program to three years from two.

“No action was the consensus this time, yet still I heard some people expected something out of the BOJ,” saidMasaaki Kanno, chief economist at JPMorgan Securities Japan Co. in Tokyo and a former BOJ official. “If the European situation gets worse, buying longer-term debt won’t be enough. They may have to move in June depending on circumstances.”

Hong Kong’s Hang Seng Index dropped 1.3 percent. The Shanghai Composite Index, which tracks the larger of China’s stock exchanges, lost 0.4 percent.

Australia’s S&P/ASX 200 fell 1.3 percent. South Korea’s Kospi Index lost 1.1 percent and Taiwan’s Taiex Index (TWSE) dropped 1.8 percent. Singapore’s Straits Times Index slid 1.5 percent.

Cosco, Nintendo

The Standard & Poor’s 500 Index (SPXL1) added 0.1 percent in New York yesterday. Futures on the index lost 0.8 percent today as European Union leaders prepared to meet in Brussels to discuss how to revive growth in the region.

Companies that do business in Europe fell. Cosco Pacific lost 4 percent to HK$9.09 in Hong Kong. Nintendo Co., a maker of video-game players that depends on Europe for a third of its sales, fell 2.3 percent to 9,100 yen in Osaka.

Stocks also fell as Japan’s finance ministry reported exports rose a less-than-estimated 7.9 percent in April from a year earlier, while imports gained 8 percent, widening the trade deficit to 520.3 billion yen ($6.5 billion). Mitsui & Co. slid 1.6 percent to 1,124 yen, and Mitsubishi Corp. (8058), a Japanese trading company, dropped 1.7 percent to 1,552 yen.

Fitch Ratings cut Japan’s foreign-currency rating by two levels to A+ yesterday with a negative outlook.

China Expectations

Asian equities rose yesterday for a second day on speculation China and Europe will do more to drive growth. Premier Wen Jiabao said over the weekend that China will focus more on spurring the economy. The nation’s central bank may cut interest rates if data for May indicate its economic slowdown is accelerating, China Securities Journal reported, citing unidentified people.

“We are seeing a change in rhetoric,” said Russell Investment’s Pease. “The Chinese government sees the economy continuing to weaken much more through the June quarter, and they are prepared to step in with more stimulus measures.”

Computer makers slid in Taiwan after Dell forecast lower- than-estimated second-quarter revenue, citing competition and demand challenges. Quanta Computer declined 4.2 percent to NT$77.80 in Taipei. Asustek Computer lost 5.3 percent to NT$283.50, and Compal Electronics Inc. dropped 2.5 percent to NT$31.20.

Among other stocks that fell, Shanghai Pharmaceuticals plunged 24 percent to HK$9.11 in Hong Kong after the 21st Century Business Herald reported the China Securities Regulatory Commission and the Hong Kong Stock Exchange are investigating the company for suspected financial fraud.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at

To contact the editor responsible for this story: Nick Gentle at

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