Asia Stocks Decline as Europe Halts Greece Aid, Fed Cuts Outlook

Asian stocks declined as European leaders withheld aid to Greece after the country said it will hold a referendum on a bailout package and the U.S. Federal Reserve cut its forecast for the world’s biggest economy.

HSBC Holdings Plc (HSBA), Europe’s biggest lender, dropped 2.9 percent in Hong Kong on speculation a default by Greece will threaten bank earnings. United Overseas Bank Ltd. (UOB), Singapore’s No. 3 lender by market value, sank 3 percent after posting profit that missed estimates. LG Electronics Inc. (066570), the world’s third-biggest mobile phone maker, slumped 14 percent in Seoul as the company is said to plan a 1 trillion won ($885 million) share sale.

The MSCI Asia Pacific Excluding Japan Index slipped 1.5 percent to 411.92 as of 6:55 p.m. in Hong Kong. The measure gained 13 percent last month, the most since May 2009, as Europe appeared to be closing in on a deal to contain its debt crisis, reports showed the U.S. economy grew faster and China hinted at easier monetary policy.

“Things have been negative in Greece,” Erik Ristuben, New York-based chief investment officer at Russell Investments, said in a Bloomberg Television interview. “We’re going to see a lot of volatility over the next couple of months as Europe works through political problems. The U.S. is very vulnerable to what’s going on in Europe.”

South Korea’s Kospi Index declined 1.5 percent. Australia’s S&P/ASX 200 lost 0.3 percent. Japanese markets were closed today for a holiday. Hong Kong’s Hang Seng Index (HSI) dropped 2.5 percent as property developers slid after home sales fell.

China’s Shanghai Composite Index added 0.2 percent, extending gains for a third day, on speculation the government will accelerate measures to boost the economy after a report on non-manufacturing industries signaled tight monetary policies are hurting businesses.

Banks Slide

Financial stocks were the biggest drag on the MSCI Asian gauge as European leaders kept an aid installment of 8 billion euros ($11 billion) for Greece on hold until Greek voters approve the bailout package in a referendum next month.

HSBC dropped 2.9 percent to HK$65.50. Standard Chartered Plc (STAN), the U.K.’s second-biggest lender by market value, declined 4 percent to HK$172.80.

“Further uncertainty in the Europe will drag the other regions further down, including U.S.,” said Daphne Roth, Singapore-based head of Asian equity research at ABN Amro Private Bank in a telephone interview.

Futures on the Standard & Poor’s 500 Index rose 0.2 percent today, reversing an earlier loss of up to 1.7 percent. The gauge increased 1.6 percent in New York yesterday as the Federal Reserve Chairman Ben S. Bernanke said the Fed may take further steps to boost growth that’s likely to be “frustratingly slow.”

Fed Plans

The Federal Open Market Committee yesterday kept policy unchanged, saying they would lengthen the maturity of the Fed’s bond portfolio and hold the benchmark interest rate near zero through at least mid-2013 if unemployment remains high and the inflation outlook is “subdued.”

Exporters dropped as officials cut their U.S. growth forecasts for next year and predicted unemployment will average between 8.5 percent to 8.7 percent in the final quarter of 2012.

Li & Fung Ltd. (494), a supplier of toys and clothes that counts the U.S. as its biggest market, sank 5.6 percent to HK$14.50. Yue Yuen Industrial Holdings Ltd. (551), a supplier of Nike Inc.’s shoes, fell 2.5 percent to HK$21.60. Compal Communications Inc. (8078), the maker of mobile phones that gets more than half of sales from the Americas, slumped 7 percent to NT$40.60 in Taipei.

Hong Kong Property

Property developers in Hong Kong declined after a report showed home sales in the Chinese city fell for a 10th straight month, dropping by half in October from a year ago as buyers put off purchases. The government introduced new housing curbs in June and banks increased mortgage rates in September.

Sun Hung Kai Properties Ltd. (16), the world’s biggest developer by market value, slipped 3.3 percent to HK$103.60. Cheung Kong Holdings Ltd. (1), a real estate company controlled by billionaire Li Ka-shing, sank 3.7 percent to HK$92. Hang Lung Properties Ltd. (101), Hong Kong’s third-largest developer, declined 4.3 percent to HK$26.85.

The MSCI Asia Pacific Excluding Japan Index declined 14 percent this year through yesterday, compared with a 1.6 percent drop by the S&P 500 and a 14 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian gauge were valued at 12 times estimated earnings on average, compared with 12.5 times for the S&P 500 and 10.2 times for the Stoxx 600.

Missed Estimates

Of the 216 companies on the Asian gauge that reported results since Oct. 11, 112 missed analysts’ estimates, while 74 exceeded expectations, according to data compiled by Bloomberg.

United Overseas Bank dropped 2.6 percent to S$16.26 in Singapore after a report showed third-quarter net income fell 24 percent from a year earlier, missing analyst estimates.

Australia & New Zealand Banking Group Ltd. (ANZ), the worst performer among Australia’s four largest bank stocks this year, fell 2 percent after posting second-half profit that missed analyst forecasts as volatile markets eroded trading profit.

LG Electronics slumped 14 percent to 61,600 won in Seoul, the most in the regional gauge. The company, which is reeling from losses at its flat-panel and mobile-phone units, is expected to make a statement on a planned share sale after the close of trading, according a person with knowledge of the plan.

“If rumors are true, I believe the sale is aimed at raising funds for investments to boost competitiveness, especially given that the company has been reporting weak earnings,” said Han Sang Soo, a fund manager at Seoul-based Samsung Asset Management Co. Samsung’s $29 billion assets under management include LG Electronics shares. Sally Lee, a spokeswoman for Seoul-based LG, declined to comment.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.

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