Most Asian Stocks Drop as U.S. Budget Talks Stall; Fairfax Gains

Most Asian stocks declined, paring this year’s advance, with a deadline looming for the U.S. Congress to reach a budget agreement to avert automatic tax increases and spending cuts.

BHP Billiton Ltd. (BHP) and Rio Tinto Group, the world’s largest mining companies, led declines among companies with earnings closely tied to economic growth. Fairfax Media Ltd. surged 7.4 percent, paring its slump in 2012, amid speculation billionaire Gina Rinehart and investor John Singleton may seek control of Australia’s second-largest newspaper publisher. China Resources Power Holdings Co. (836), a Hong Kong-listed mainland utility, rose 1.4 percent after a survey showed Chinese manufacturing speeding up.

The MSCI Asia Pacific excluding Japan Index was little changed at 466.50 as of 6:28 p.m. in Hong Kong. About five shares fell for every four that rose. Japan’s Nikkei 225 Stock Average posted the biggest annual advance since 2005, surging 23 percent, and the benchmark MSCI Asia Pacific Index gained 14 percent in 2012 as central banks from the U.S., Europe, Japan and China took action to spur economic growth.

“Some investors are looking through this in the hope that politicians can find a middle ground that will allow the increasing momentum in the economy not to be impeded,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne, in a phone interview today. “We’re in a period of frenetic negotiations. It’s disappointing that politics has got in the way to such an extent, with investors becoming increasingly nervous that this will drag on into the new year.”

China Factories

Asian shares pared declines after China’s manufacturing expanded at a faster pace in December, according to the final reading of a Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics today. The 51.5 figure, the highest since May 2011, compares with the 50.9 preliminary reading published Dec. 14 and 50.5 in November. A reading above 50 indicates expansion.

China Resources Power, the fourth biggest listed-power generation company in China, gained 1.4 percent to HK$19.78. Citic Pacific Ltd. (267), which makes steel, mines iron ore and sells cars, gained 2.5 percent to HK$11.56. China Longyuan Power Group Corp., a wind farm producer, gained 2.7 percent to HK$5.36.

“This improvement was mainly driven by an expansion of production, on the back of a strong increase in new business inflows,” said Xiaoping Ma, a China economist at HSBC Holdings Plc in a note today. “We expect Beijing to keep its pro-growth fiscal and monetary policy stance in place, and pursues an appropriate pace of growth in total social financing as well as tax cuts. Growth in infrastructure investment is expected to maintain strong momentum as there are still plenty key construction projects in the pipeline.”

Markets Close

Australia’s S&P/ASX 200 Index (AS51) lost 0.5 percent for an annual gain of 15 percent. New Zealand’s Exchange 50 Gross Index retreated 0.4 percent, taking its 2012 gain to 24 percent. Hong Kong’s Hang Seng Index (HSI), up 23 percent this year, slid less than 0.1 percent and China’s Shanghai Composite gained 1.6 percent.

Markets in Japan, South Korea, Taiwan, Indonesia, Thailand, Philippines and Vietnam are closed today for a holiday. Trading in Australia, New Zealand, Hong Kong and Singapore ends early today ahead of the New Year holiday.

Thailand’s SET Index surged 36 percent this year, the biggest advance by any Asian benchmark gauge after Pakistan’s Karachi 100 Index.

Cliff Talks

Standard & Poor’s 500 Index futures expiring in March rose 0.3 percent, paring a decline from after U.S. markets closed Dec. 28. Senate Majority Leader Harry Reid rejected the latest Republican offer to resolve the crisis as Minority Leader Mitch McConnell reached out to Vice President Joe Biden to try to break the impasse.

Congress is working to avert more than $600 billion in tax rises and spending cuts, known as the fiscal cliff, and a failure risks a recession, the Congressional Budget Office has warned. The Senate will resume its session today.

PT Bumi Resources (BUMI) slumped 73 percent in 2012 in Jakarta, the biggest slide among companies on Asia’s benchmark stocks index. Bumi is at the center of a dispute between its founders Nathaniel Rothschild and Indonesia’s Bakrie Group amid ongoing investigations in London and Indonesia into possible financial anomalies.

Sharp Corp. tumbled 55 percent this year as the TV maker warned last month about its ability to survive amid competition from overseas rivals. Japan’s largest liquid-crystal-display maker is selling as much as 9.9 billion yen ($121 million) selling shares to Qualcomm Inc. in a bid to restore its balance sheet.

Indian Drinkmaker

India’s United Spirits Ltd. (UNSP) posted the largest gains among Asian stocks this year, soaring 286 percent, as Diageo Plc said it will buy a controlling stake in the country’s largest distiller for $2.04 billion.

BHP Billiton lost 0.8 percent to A$37.10. Rio Tinto slid 0.8 percent to A$66.01. Newcrest Mining Ltd. retreated 1.5 percent to A$22.18.

Fairfax soared 7.4 percent to 51 Australian cents. Rinehart, who failed in a bid for a board seat this year, and Singleton own 15.14 percent of Fairfax and agreed to consult on key issues related to boosting “shareholder value,” according to a filing today.

Rinehart and Singleton may seek control of the publishing company to pursue asset sales after teaming up to boost their say at the newspaper publisher, said Mark McDonnell, Sydney- based analyst at BBY Ltd.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

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

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