Asian Stocks Fall on Japan Growth Downgrade, Fed Policy

Asian stocks fell, with the regional benchmark index heading for a three-week low, after Japan downgraded its assessment of the world’s third-biggest economy and as investors await indications of policy direction from the Federal Reserve.

China Southern Airlines Co. fell 2.8 percent in Hong Kong as Asia’s biggest carrier by passenger numbers reported first- half profit tumbled. Shikoku Electric Power Co. (9507) sank 10 percent in Tokyo after Credit Suisse Group AG rated the stock underperform. Aozora Bank Ltd. (8304) surged 14 percent after the Japanese lender unveiled a plan to repay a taxpayer bailout and buy back common stock.

The MSCI Asia Pacific Index dropped 0.5 percent to 119.17 as of 5:05 p.m. in Tokyo, heading for its lowest close since Aug. 6. About two shares fell for each that rose on the gauge. The measure climbed 10 percent from a June low through yesterday on bets the U.S., Europe and China will take action to support economic expansion. Investors are waiting for hints of further easing in Federal Reserve Chairman Ben S. Bernanke’s speech on Aug. 31 at an annual economic symposium in Jackson Hole, Wyoming.

“There’s no fundamental basis in doing another quantitative easing,” said Khiem Do, Hong Kong-based head of multi-asset strategy at Baring Asset Management (Asia) Ltd., which oversees about $8 billion. “The U.S. economy has pretty good momentum.”

Spending by U.S. consumers is expected to have climbed in July by the most in five months, easing concern the biggest part of the economy is backsliding, economists said before a report on Aug. 30. Revised second-quarter gross domestic product to be released tomorrow by the Commerce Department may show the world’s biggest economy grew faster than initially estimated.

Japanese Economy

Japan’s Nikkei 225 Stock Average (NKY) lost 0.6 percent, reversing earlier gains of as much as 0.6 percent. The government lowered its assessment of the nation’s economy, cutting its view on personal consumption, home-building, exports, imports and industrial production, according to a monthly report released by the Cabinet Office in Tokyo today.

Taiwan’s Taiex Index slipped 1.4 percent. South Korea’s Kospi slid 0.1 percent. Australia’s S&P/ASX 200 Index added 0.4 percent. Hong Kong’s Hang Seng Index rose 0.1 percent.

China’s Shanghai Composite Index (SHCOMP) advanced 0.9 percent on speculation more state-owned companies will buyback shares after Baoshan Iron & Steel Co. announce such a plan yesterday.

Futures on the Standard & Poor’s 500 Index gained 0.1 percent today. The gauge fell 0.1 percent yesterday amid doubts the Federal Reserve will announce further economic stimulus.

Bernanke Speech

Bernanke probably won’t use his speech this week to suggest a third round of bond buying is at hand, according to economists such as Michael Feroli at JPMorgan Chase & Co. and James O’Sullivan at High Frequency Economics.

China Southern Airlines retreated 2.8 percent to HK$3.50 as first-half profit slumped 85 percent from a year earlier to 424 million yuan ($67 million). The result missed analysts estimates as a deepening economic slowdown sapped travel demand and fuel costs increased.

Of the 488 companies in the Asia-Pacific index that have reported quarterly earnings since July 1, and for which Bloomberg has estimates, more than half failed to meet projections, according to data compiled by Bloomberg.

Singamas Container Holdings Ltd. slid 1.7 percent to HK$1.70 as the world’s second-largest maker of sea-cargo boxes reported a 63 percent drop in first-half profit to $38.2 million.

Newcrest Mining

Utilities posted the biggest decline among the 10 industry groups in the MSCI Asia Pacific Index. (MXAP) Shikoku Electric slumped 10 percent to 1,001 yen. Kyushu Electric Power Co. declined 9.3 percent to 627 yen. Credit Suisse rated both utilities underperform in new coverage of the shares.

Newcrest Mining Ltd. (NCM), Australia’s largest gold producer, lost 1.9 percent to A$26.70 in Sydney after saying production at its Lihir mine in Papua New Guinea was suspended amid a dispute with landowners.

The MSCI Asia Pacific Index fell 7.1 percent from this year’s high on Feb. 29 through yesterday. Stocks on Asia’s benchmark index were valued at 12.5 times estimated earnings on average, compared with 13.7 for the S&P 500 and 11.7 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Among stocks that rose, Aozora Bank surged 14 percent to 238 yen, the most since December 2009, after the lender said it plans to spend 227.6 billion yen ($2.9 billion) to repay a taxpayer bailout over 10 years and buy back common stock.

China Petroleum & Chemical Corp., the country’s biggest refiner, jumped 5.4 percent to 6.23 yuan in Shanghai, amid speculation more state-owned companies may announce share buyback plans after Baoshan Iron & Steel said it will spend as much as 5 billion yuan ($790 million) purchasing its own shares. Baoshan advanced 10 percent to 4.48 yuan.

“More companies may follow Baoshan to buy back their shares as stock prices are so low,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai.

To contact the reporter 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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