Dec. 4 (Bloomberg) -- Asian stocks fell after Japanese businesses cut investment at the fastest pace in six years last quarter. China stocks surged after a report that the government may inject more funds into the nation's largest banks.

Sumitomo Mitsui Financial Group Inc. dropped 7 percent, leading declines among Japanese banks. Industrial & Commercial Bank of China Ltd. climbed 3.4 percent on speculation the country's $200 billion sovereign wealth fund raised its holdings in the nation's three largest lenders. Billabong International Ltd. plunged 18 percent, the most on record, after saying first- half earnings will probably fall.

“The market is in a tug of war, with the optimists betting government measures will help lift markets, while the pessimists point to the deteriorating macroeconomic data,” said Nicole Sze, a Singapore-based investment analyst at Bank Julius Baer & Co., which manages $350 billion in assets.

The MSCI Asia Pacific Index fell 0.5 percent to 79.52 at 12:59 p.m. in Tokyo, after gaining 0.8 percent. About five stocks dropped for every four that gained on the measure. Japan's Nikkei 225 Stock Average declined 1 percent to 7,923.22. China's CSI 300 Index advanced 4.1 percent to 2,033.24.

To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net

Last Updated: December 3, 2008 23:11 EST