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Asian Stocks Decline for Second Week on Concern Earnings Growth Will Slow

Asian stocks fell for a second week, paring the benchmark index’s second consecutive monthly gain, on concern earnings growth will slow and possible asset purchases by the Federal Reserve may disappoint investors.

BYD Co. tumbled 17 percent in Hong Kong after the Chinese carmaker backed by Warren Buffett said quarterly profit was almost wiped out. Singapore Exchange Ltd. lost 7.8 percent after offering to buy Australia’s ASX Ltd. NGK Insulators Ltd., a maker of insulators and industrial ceramic products, plunged 21 percent in Tokyo after cutting its profit forecast.

“I’m a bit cautious at the moment,” said Chris Leung, a Hong Kong-based portfolio manager at Taifook Asset Management Ltd. “Ahead of the Federal Reserve meeting next week, I’d look to take some profit. As economic data turns stronger, I doubt whether the Fed is going to push the size of quantitative easing. There might be a chance that it won’t meet market expectation.”

The MSCI Asia Pacific Index fell 0.4 percent this week to 129.36, extending last week’s 0.9 percent drop. The gauge rose 2.4 percent in October, its second consecutive gain since Federal Reserve Chairman Ben S. Bernanke on Aug. 27 said more securities purchases may be warranted if U.S. growth slows.

The U.S. central bank is expected to announce a decision on its quantitative-easing strategy at the conclusion of the Federal Open Market Committee’s Nov. 2-3 meeting.

Japan’s Nikkei 225 Stock Average dropped 2.4 percent this week. Hong Kong’s Hang Seng Index declined 1.8 percent, South Korea’s Kospi Index slipped 0.8 percent. China’s Shanghai Composite Index rose 0.1 percent. Australia’s S&P/ASX 200 Index increased 0.3 percent.

NGK Insulators Plunges

BYD tumbled 17 percent to HK$47.25 after reporting third- quarter profit dropped 99 percent to 11.34 million yuan ($1.7 million) amid faltering sales.

NGK Insulators plunged 21 percent to 1,219 yen in Tokyo, the biggest decline on the MSCI index this week. The maker of equipment for electricity networks lowered its full-year profit and sales forecasts, citing delays in orders from China.

Sharp Corp., Japan’s largest maker of liquid-crystal displays, Samsung Electronics Co., the world’s biggest maker of televisions, memory chips and flat screens, Japan Tobacco Inc., the No. 3 publicly traded cigarette maker worldwide, and Esprit Holdings Ltd., a Hong Kong-based clothing retailer, all fell at least 4 percent this week after reporting or forecasting weaker financial results.

This was the peak week for earnings reports, with more than 375 of the almost 1,000 companies in the MSCI Asia Pacific Index releasing results, according to data compiled by Bloomberg. About four companies have exceeded profit estimates for every three that have fallen short, based on Bloomberg data compiled since Oct. 7.

Yen, Takeover

The yen appreciated to a 15-year high against the dollar this week, threatening to cut the value of overseas income at Japanese companies when converted into their home currency and further weighing on their shares. The yen is on course for its strongest annual average level since currencies began trading freely in 1971, according to Bloomberg data and based on each day’s closing price.

Singapore Exchange, which oversees the largest stock market in Southeast Asia, lost 7.8 percent to S$8.80 this week after bidding about $8 billion to buy ASX, the operator of Australia’s main stock exchange. Three Australian lawmakers said Oct. 28 they opposed the transaction. ASX gained 6.4 percent to A$37.18.

The rationale for Singapore Exchange’s bid for ASX is “unconvincing,” Anand Swaminathan and Sanjay Jain, analysts at Credit Suisse Group AG, said in a note to clients. “ASX is not attractive in terms of profitability and growth profile. It is also set to face stiff margin pressure due to competition.”

AIA, KDDI Rise

Among stocks that rose, AIA Group Ltd., the insurer sold by American International Group Inc., soared 17 percent to HK$23.05 on its debut yesterday in Hong Kong, raising $17.8 billion in the city’s biggest initial public offering in history.

KDDI Corp., Japan’s second-largest mobile-phone-network operator, jumped 6.6 percent to 433,500 yen in Tokyo after saying it will spend as much as 100 billion yen ($1.2 billion) to buy back shares.

The MSCI Asia Pacific Index has risen about 7 percent this year on speculation profit growth will weather Europe’s debt crisis, China’s steps to curb property-price gains and concern about the pace of the U.S. economic recovery. Shares in the gauge are valued at an average of about 14 times estimated earnings, their highest level since mid-September.

To contact the reporters for this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net.

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net.

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