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Asian Stocks Pare Monthly Gain as Fed Fuels Tapering Bets

Asian stocks fell, trimming the best two-month rally for the regional benchmark gauge since the start of 2012, after the Federal Reserve fueled bets it may start paring stimulus sooner than previously forecast.

Alacer Gold Corp. sank 4.1 percent in Sydney as the price of the precious metal declined. Honda Motor Co. (7267) lost 1.3 percent after Japan’s third-largest carmaker reported second-quarter profit that missed analysts’ estimates amid slowing motorcycle sales in Southeast Asia. National Australia Bank Ltd. (NAB) retreated 2.5 percent as expenses climbed at the country’s largest lender by assets.

The MSCI Asia Pacific Index dropped 0.6 percent to 142.36 as of 6:34 p.m. in Hong Kong, with eight of the 10 industry groups on the measure retreating. While the Fed said fiscal policy is “restraining economic growth,” policy makers see signs of “underlying strength.” The Bank of Japan kept its policy unchanged at a meeting today.

“Tapering is inevitable, and that’s what you read from last night’s statement,” said Donald Williams, Sydney-based chief investment officer at Platypus Asset Management Ltd., which oversees about A$1.6 billion ($1.5 billion). “The timing is still unsure, but the market is going to price in the likelihood of tapering in the next six months at the latest.”

The odds of the Fed starting to taper its stimulus in January rose to 45 percent from 25 percent before yesterday’s statement, Citigroup Inc. said. Economists surveyed by Bloomberg Oct. 17-18 predicted the Fed would begin paring stimulus in March.

Regional Gauges

Japan’s Topix index lost 0.9 percent as the Bank of Japan maintained its campaign of unprecedented monetary stimulus. Governor Haruhiko Kuroda’s board kept a pledge to expand the monetary base by between 60 trillion yen and 70 trillion yen ($712 billion) a year, in a decision released in Tokyo today. That matched the forecasts of all 34 economists in a Bloomberg News survey.

China’s Shanghai Composite declined 0.9 percent after the nation’s top four banks posted their biggest increase in soured loans since at least 2010. Hong Kong’s Hang Seng Index (HSI) retreated 0.4 percent. Singapore’s Straits Times Index slipped 0.6 percent and Taiwan’s Taiex Index lost 0.2 percent. South Korea’s Kospi Index slid 1.4 percent.

New Zealand’s NZX 50 Index gained 0.9 percent after the central bank kept its benchmark interest rate at a record low. Australia’s S&P/ASX 200 Index slipped 0.1 percent.

U.S. Futures

The MSCI Asia Pacific Index rose 2.7 percent in October, for its second monthly increase. That pushed its price-earnings ratio to 13.7 times estimated earnings from 12.7 at the end of August, according to data compiled by Bloomberg. That compares with 15.9 for the Standard & Poor’s 500 Index and 14.9 for the Stoxx Europe 600 Index.

Futures on the S&P 500 fell 0.3 percent today after the equity gauge yesterday lost 0.5 percent, halting a four-day winning streak.

The Fed maintained its $85 billion in monthly bond purchases yesterday as expected by strategists, saying it needs to see more evidence that the economy is improving.

Fed Chairman Ben S. Bernanke is pushing unprecedented accommodation into the final months of his term as he seeks to shield the four-year economic expansion from the impact of higher borrowing costs and this month’s partial U.S. government shutdown. The 16-day closing resulted in the furloughs of as many as 800,000 federal workers and delayed release of data the Fed says it needs to evaluate the economy.

Earnings Season

Of the companies on the Asia-Pacific gauge that have reported quarterly results this season and for which Bloomberg compiles estimates, 48 percent have exceeded analysts’ estimates on profit, while 53 percent posted better-than-expected revenue.

Gold lost 0.7 percent to $1,334.66 an ounce, dragging producers of the metal lower. Alacer fell 4.1 percent to A$3.02 and Perseus Mining Ltd. declined 6.5 percent to 43.5 Australian cents.

Honda dropped 1.3 percent to 3,915 yen. Net income climbed 46 percent to 120.4 billion yen in the three months ended Sept. 30, trailing the 139 billion yen average estimate of seven analyst estimates compiled by Bloomberg.

National Australia Bank declined 2.5 percent to A$35.31. The bank’s cost-to-income ratio climbed 130 basis points to 42.6 percent in the year reflecting compensation paid to U.K. customers, a restructuring of its Australian businesses and costs related to a reduction in U.K. and Australian employees, the bank said.

Chinese developers jumped after the Xinhua News Agency reported China will accelerate the process of public housing construction, citing President Xi Jinping at a study session of Communist Party’s politburo.

Shimao Property Holdings Ltd. (813) added 5.5 percent to HK$19.52. Country Garden Holdings Co., controlled by China’s richest woman Yang Huiyan, rose 3.9 percent to HK$5.30. Guangzhou R&F Properties Co., a builder in the southern Chinese city, climbed 3.8 percent to HK$13.60.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; 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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