April 29 (Bloomberg) -- Asian stocks fell, led by companies in Taiwan on concern ties with mainland China are deteriorating, and as Hyundai Heavy Industries Co. dragged shipbuilders lower on speculation rising steel prices will erode earnings.

Taiwan Semiconductor Manufacturing Co. and Hon Hai Precision Industry Co. pulled the Taiex index to its biggest slump in six weeks after a pro-independence politician was appointed to manage ties with the mainland and a newspaper said the island's top negotiator canceled a trip to China. The Taiex had risen this year on the promise of closer ties. Hyundai Heavy, the world's largest shipbuilder, dropped the most in seven weeks in Seoul.

``When expectations are built up, any hitch in cross-straits ties will be met by selling,'' said Leslie Phang, Singapore-based head of private client investments at Schroders Plc, which manages $275 billion. The Taiwan Strait separates the island from the mainland.

The MSCI Asia Pacific excluding Japan Index fell 0.2 percent to 491.41 at 5:37 p.m. in Hong Kong. Six of its 10 industry groups declined, led by a measure of computer-related shares.

About half of Asia's markets open for trading slumped, with Taiwan's Taiex index falling 2.1 percent, the sharpest decline in the region and the biggest drop since March 13. Japan's markets were closed for a public holiday.

Huadian Power International Corp. led gains by Chinese electricity utilities, which had the steepest advance on MSCI's Asian index. South Korea's Hyundai Heavy was the biggest drag on the Kospi index after Credit Suisse Group reduced its profit estimates, citing higher steel prices.

Taiwan Tumbles

The Standard & Poor's 500 Index in the U.S. slipped 0.1 percent yesterday, and index futures fell by the same amount today. Futures on the Chicago Board of Trade show a 78 percent chance that the Federal Reserve will cut the target rate for overnight lending between banks by a quarter percentage point to 2 percent at its meeting tomorrow, unchanged from a day ago. The remainder of bets is for the rate to hold at 2.25 percent.

In Taiwan's Taiex index, more than three stocks declined for each that advanced. Taiwan Semiconductor, the world's largest maker of made-to-order chips, dropped 2.7 percent to NT$64.70. Hon Hai Precision, which makes iPhones for Apple Inc., declined 2.2 percent to NT$176.

Cathay Financial Holding Co., Taiwan's largest financial- services company, retreated 2.9 percent to NT$82.60, its sharpest drop this month.

Canceled Visit

Chiang Pin-kung, Taiwan's designated negotiator for China affairs, canceled a visit scheduled for next month, the United Daily News reported, citing a person familiar with the matter whom it did not name. The naming of a former lawmaker from the pro-independence Taiwan Solidarity Union to chair a cross-straits liaison office may prompt changes in China's attitude to the island, the newspaper said.

The Taiex index surged 4 percent on March 24, its biggest gain since Aug. 20, 2007, after Ma Ying-jeou was elected Taiwan's president on pledges to forge closer ties with China and boost domestic spending.

Yesterday, a spokesman for Ma said the Taiwan's premier- designate will name Lai Shin-yuan, a former lawmaker for the pro- independence Taiwan Solidarity Union, as chairwoman of the Mainland Affairs Council.

Taiwan Cement Corp., the island's biggest producer of the building material, tumbled 6.6 percent to NT$51, the most since Jan. 23, after JPMorgan Chase & Co. downgraded the stock because of rising coal prices and a stronger local currency.

Huadian Power International Corp., a unit of China's fourth- largest electricity generator, gained 7.3 percent to HK$2.65, the highest since Feb. 29. Huaneng Power International Inc., the second-largest Hong Kong-listed power producer, added 5.6 percent to HK$6.26, its steepest advance since April 24.

Chinese Utilities Rise

Datang International Power Generation Co., the largest Hong Kong-traded Chinese electricity producer, gained 2.9 percent to HK$5.20. Its Shanghai-traded shares rose 3 percent to 13.76 yuan.

The Chinese government is discussing proposals to end losses at power producers as higher coal prices drive up fuel costs, the China Business News reported, citing an official it didn't identify.

``Corporate earnings in countries that have to buy those products are going to take a hit,'' said Choi Byung Ro, a managing director at Yurie Asset Management Inc. in Seoul, which has $3 billion in equities.

Yanzhou Coal Mining Co., the listed unit of China's fourth- largest coal-mining company, gained 4.3 percent to HK$14.42, the highest since Jan. 16. First-quarter profit more than doubled on increased demand and higher coal prices and after JPMorgan Chase & Co. raised its share price target by 29 percent.

Shenhua, Shipbuilders

China Shenhua Energy Co., the country's largest coal producer, fell 4.1 percent to HK$36.15, the most in two weeks, after Anglo American Plc sold all the shares it had purchased during its initial public offering in June 2005.

Hyundai Heavy led shipbuilders lower, dropping 5.6 percent to 355,000 won in Seoul, its biggest slump since March 10. Credit Suisse Group reduced its estimates for the company's 2008 and 2009 net income, saying steel prices may rise 20 percent in the fourth quarter.

Samsung Heavy Industries Co., the world's No. 2 shipbuilder, fell 2.6 percent to 34,400 won. Cosco Corp. Singapore Ltd., the shipbuilding unit of China's biggest shipping line, tumbled 6.1 percent to S$3.10, the most since April 10.

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

Last Updated: April 29, 2008 05:39 EDT