Asian Stocks Drop as Fed Minutes Signal Tapering Support

Asian stocks fell, almost wiping out this year’s gains, as the regional equity benchmark posted its longest losing streak since November after Federal Reserve minutes signaled broad support for stimulus cuts.

Mazda Motor Corp. (7261), a Japanese carmaker that gets 30 percent of its revenue in North America, slumped 2.3 percent. SM Investments Corp., owner of the Philippine’s biggest shopping-mall operator, tumbled 8.9 percent in Manila as the nation’s stock market reopened after a three-day closure. Brambles Ltd. (BXB), an Australian container maker, slid 5.2 percent after its profit missed estimates. China Shenhua Energy Co., the nation’s top coal miner by market value, rose 2.3 percent in Hong Kong on data showing mainland manufacturing unexpectedly expanded.

The MSCI Asia Pacific Index dropped 0.8 percent to 129.55 at 8:13 p.m. in Tokyo, paring its gain so far this year to 0.1 percent. All but one of the measure’s 10 industry groups fell. The index pared losses as German manufacturing grew at a faster-than-expected pace, adding to optimism of global recovery following China’s data.

“It seems there’s obviously unanimous, broader support for tapering and it seems the prospect of tapering sooner rather than later is a good excuse for markets to have a correction,” Don Williams, chief investment officer at Platypus Asset Management Ltd. in Sydney, which manages about $1.2 billion, said by telephone. “The market is correcting and that might continue for some time.”

Fed Minutes

Minutes released yesterday from the Federal Open Market Committee’s July meeting showed officials were “broadly comfortable” with Chairman Ben S. Bernanke’s plan to start reducing bond buying this year if the economy improves, with a few saying tapering might be needed soon.

The Asia-Pacific gauge has erased almost all this year’s gains, lagging a 15 percent surge in the Standard & Poor’s 500 Index as growth slows in China and speculation that the Fed will curb stimulus spurred investors to sell assets across Asia and emerging markets.

Japan’s Topix (TPX) slid 0.2 percent. South Korea’s Kospi index dropped 1 percent, with volume 30 percent above its 30-day intraday average. Australia’s S&P/ASX 200 Index declined 0.5 percent, while New Zealand’s NZX 50 Index also lost 0.5 percent.

Hong Kong’s Hang Seng Index climbed 0.4 percent, and China’s Shanghai Composite Index retreated 0.3 percent. Taiwan’s Taiex dropped 0.2 percent, and Singapore’s Straits Times Index fell 0.6 percent.

September Paring

U.S. policy makers will probably pare $85 billion in monthly bond purchases at the FOMC’s Sept. 17-18 meeting, according to 65 percent of 48 economists surveyed this month by Bloomberg.

Futures on the S&P 500 rose 0.4 percent today. The S&P 500 fell 0.6 percent in New York yesterday to close at the lowest level since July 8.

Mazda slid 2.3 percent to 390 yen in Tokyo, while Sony Corp., an electronics maker that gets about two-thirds of sales overseas, declined 1.6 percent to 1,906 yen. James Hardie Industries SE, a building-materials supplier that counts the U.S. as its biggest market, retreated 2.2 percent to A$9.68 in Sydney.

Tepco Leak

Tokyo Electric Power Co. (9501), the operator of the Fukushima nuclear facility, slumped 4.1 percent to 534 yen, extending losses this week after Japan’s Nuclear Regulation Authority yesterday said a radioactive water leak at its stricken plant is a “serious incident” rated three on the seven-level International Nuclear and Radiological Event Scale. The company said it needs overseas expertise to contain the disaster.

Brambles slumped 5.2 percent to A$8.70 in Sydney after the company said its profit for the year ended June 30 was A$640.6 million ($576 million), missing analyst estimates.

Atlas Iron Ltd. (AGO), a producer of the ore, tumbled 10 percent to 83.5 Australian cents after its full-year underlying income of A$13.7 million missed analyst estimates.

BHP Billiton Ltd. (BHP), the world’s biggest mining company, sank 1 percent to A$35.37 in Sydney, extending its steepest two-day decline since June. Rio Tinto Group, the second-largest miner, retreated 0.9 percent to A$59.04 after the London Metal Exchange Index dropped 1.2 percent yesterday.

SM Investments tumbled 8.9 percent to 725 pesos in Manila. The Philippine Stock Exchange Index (PCOMP) tumbled 6 percent, the worst-performing among major Asian emerging-market indexes. The country’s stock exchange has been closed and trading of currencies and government bonds was halted this week because of floods in Manila and a public holiday yesterday.

China Manufacturing

A Chinese manufacturing index rose in August from an 11-month low, adding to signs the world’s second-biggest economy is stabilizing. The preliminary reading of 50.1 for a Purchasing Managers’ Index released today by HSBC Holdings Plc and Markit Economics compares with a final figure of 47.7 in July and the 48.2 median estimate in a Bloomberg News survey of 16 economists. A number above 50 indicates expansion.

China Shenhua Energy gained 2.3 percent to HK$24.15 in Hong Kong. China Coal Energy Co., the country’s second-largest producer of the fuel, advanced 4.7 percent to HK$4.90. PT Adaro Energy Tbk, a coal miner, surged 18 percent to 850 rupiah in Jakarta.

Among other stocks that rose, Toyo Suisan Kaisha Ltd. (2875), an instant noodle maker, gained 3.1 percent to 3,070 yen in Tokyo after SMBC Nikko raised its rating to outperform from underperform.

Origin Energy Ltd. (ORG), Australia’s largest electricity retailer, jumped 5.8 percent to A$12.98 in Sydney after obtaining A$7.4 billion in bank loans to refinance debt and bolster funding after a liquefied natural gas project begins.

Emerging Markets

Emerging market stocks were roiled this week amid concern capital outflows will accelerate. Nations from Brazil to Indonesia have raised borrowing costs in 2013 to try to aid their currencies as the prospect of reduced U.S. monetary stimulus curbs demand for assets in developing nations. Indonesia’s Jakarta Composite Index fell 1.1 percent today, taking its loss this week to 9 percent.

“You can argue that the fact that they are tapering is a good new story as they’re getting more and more confident about the healthy U.S. economy and positive globally as well,” said Platypus Asset’s Williams. “It’s a positive thing for markets that less stimulus is required but we have a transition phase here and markets are going to be choppy while everyone gets used to the idea of a different environment.”

To contact the reporter on this story: Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net

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

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