Asia Stocks Outside Japan Drop on Stimulus Cut Concern

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Photographer: Tomohiro Ohsumi/Bloomberg

A pedestrian holding an umbrella waits to cross a road in front of an electronic stock board outside a securities firm in Tokyo.

Asian stocks outside Japan fell as stronger growth in U.S. service industries fueled speculation the Federal Reserve will soon reduce economic stimulus.

HSBC Holdings Plc (5) slumped 5 percent in Hong Kong after earnings at Europe’s biggest bank missed estimates. Sony Corp. (6758) slid 4.6 percent in Tokyo after its board rejected billionaire Daniel Loeb’s call to spin off part of its entertainment business. Fonterra Shareholders Fund climbed 1.3 percent in New Zealand, recouping some of yesterday’s record decline after China and Russia halted imports of milk powder from Fonterra Cooperative Group Ltd., the world’s largest dairy exporter.

The MSCI Asia Pacific excluding Japan Index retreated 0.5 percent to 440.98 at 8:18 p.m. in Hong Kong, as more than two stocks fell for every one that rose.

“The ramp-up in the U.S. economy is not only gaining momentum, but is accelerating,” Evan Lucas, a Melbourne-based market strategist at IG Markets Ltd., a provider of trading services for equities, currencies and commodities, said by e-mail. “This is increasing the hawkish view of the Fed. This is why the September taper talk will continue. The blueprint for monetary stimulus tapering will be laid out in September with the first wind-back in October.”

Japan’s Topix index gained 0.8 percent, erasing an earlier decline of as much as 1.3 percent, after Reuters reported the pension fund for Japan’s civil servants is considering investing more of its $80 billion in stocks and less in domestic government bonds. The account quoted people Reuters said were familiar with the matter.

Pension Fund

The report is “a sentiment boost,” said Gavin Parry, managing director of Hong Kong-based brokerage Parry International Trading Ltd. “This pension fund may turn around and do what the Government Pension Investment Fund did. All these things keep the trend on track and are positive” for equities.

The GPIF, the world’s largest manager of retirement savings, said on June 7 that it’s cutting local bond holdings to buy more stocks and foreign securities.

Australia’s S&P/ASX 200 Index (AS51) fell 0.1 percent, maintaining losses after the Reserve Bank of Australia cut its benchmark interest rate to a record-low 2.5 percent from 2.75 percent. Growth in the economy has weakened over the past year as China slows, curbing demand for natural resources.

South Korea’s Kospi index dropped 0.5 percent and New Zealand’s NZX 50 Index declined 0.3 percent. Singapore’s Straits Times Index slid 0.5 percent and Taiwan’s Taiex index lost 1.2 percent. Hong Kong’s Hang Seng Index retreated 1.3 percent, and China’s Shanghai Composite added 0.5 percent.

Asian shares last week capped a sixth week of gains and the S&P 500 Index climbed above 1,700 for the first time as a report showed that U.S. economic growth beat projections in the second quarter.

Stimulus Outlook

Futures on the Standard & Poor’s 500 Index (SPX) slipped 0.2 percent today. The U.S. benchmark gauge fell yesterday from a record as investors weighed data showing stronger growth in services and Fed Bank of Dallas President Richard Fisher cautioned not to rely on $85 billion in monthly bond purchases. The central bank has said reduction of stimulus will be tied to sustained improvement in the economy.

“Financial markets may have become too accustomed to what some have depicted as a Fed put,” or the idea that the central bank will loosen credit after a market decline, Fisher said yesterday in a speech in Portland, Oregon. “Some have come to expect the Fed to keep the markets levitating indefinitely. This distorts the pricing of financial assets” and can lead to “serious misallocation of capital.”

The MSCI Asia Pacific Index, which includes Japan, rose 0.2 percent to 135.54 today. The gauge trades at 13.2 times estimated earnings, according to data compiled by Bloomberg.

Earnings Season

Of the 442 members of the Asia-Pacific gauge that have posted earnings since July 1, 50 percent have exceeded analysts’ estimates for profit and 49 percent for sales.

HSBC lost 5 percent to HK$85.10 in Hong Kong. First-half net income rose 22 percent to $10.28 billion, missing the $10.57 billion estimate of five analysts surveyed by Bloomberg. Chief Executive Officer Stuart Gulliver a slowdown in emerging markets is hurting profit.

Sony retreated 4.6 percent to 2,039 yen in Tokyo. Activist investor Loeb’s push to sell as much as 20 percent of the company’s entertainment assets in an initial public offering was rejected unanimously by the board.

Japan Exchange Group Inc. (8697) retreated 2.7 percent to 9,650 yen as Credit Suisse Group AG advised selling shares of the bourse operator. The analysts said there is “still a relatively large scope for a correction” in the share price, citing weaker trading volumes for equities and derivatives.

Fonterra advanced 1.3 percent to NZ$6.95. The stock yesterday fell the most on record after contamination concerns led China to halt imports of whey protein and a dairy base powder from Fonterra used in infant formula. Russia temporarily suspended purchases of all New Zealand dairy products.

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

To contact the editor responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net

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