Asia Stocks Drop on China Plenum Disappointment, Fed Bets

Asian stocks fell, with the benchmark index headed for a five-week low, after China’s leaders failed to outline steps to curb state dominance of the economy and amid bets the Federal Reserve may start reducing stimulus next month.

Banks slumped in Hong Kong after a communique at the end of China’s four-day plenum made scant mention of financial reforms. Tencent Holdings Ltd., China’s biggest Internet company, fell 4 percent after a news report quoted its chairman saying the company’s valuation is “scarily” high. Noble Group Ltd. lost 2.8 percent in Singapore after Asia’s largest commodity trader by sales said profit slumped. Pioneer Corp. surged 22 percent after the Japanese maker of car stereos posted an unexpected first-half operating profit.

The MSCI Asia Pacific Index dropped 0.9 percent to 138.50 as of 5:19 p.m. in Tokyo, poised for its first decline in three days and the lowest close since Oct. 8. All 10 industry groups on the measure fell.

“Quite a few people put on their positions ahead of the communique, expecting actionable moves to be made, but that’s not the case,” said Andrew Sullivan, director of sales trading at Kim Eng Securities in Hong Kong. “The market is just disappointed.”

Hong Kong’s Hang Seng Index dropped 1.9 percent to its lowest in 10 weeks as financial and communications shares led declines. China’s Shanghai Composite Index lost 1.8 percent. Japan’s Topix index lost 0.1 percent as investors weighed corporate earnings. A report today showed the country’s machinery orders dropped in September.

Regional Gauges

Taiwan’s Taiex Index slid 1.1 percent, and Singapore’s Straits Times Index lost 0.4 percent. Australia’s S&P/ASX 200 Index dropped 1.4 percent, while New Zealand’s NZX 50 Index added 0.1 percent. South Korea’s Kospi index fell 1.6 percent as Samsung Electronics Co., which gets 43 percent of its revenue in the Americas and China, slid 2.5 percent to 1,419,000 won.

China stopped short of unveiling detailed policy shifts after President Xi Jinping oversaw the gathering of Communist Party leaders in Beijing. The nation will make markets “decisive” in allocating resources, according to yesterday’s communique from the third full meeting of the party’s 18th Central Committee. At the same time, the state will remain “dominant” in the economy, indicating limits on reducing government’s role.

Investors Disappointed

“It underwhelmed, replete with visions but short on details,” Hao Hong, a Hong Kong-based strategist at Bocom International Holdings Co., said in an e-mail. “Judging from investors’ response, they are disappointed.”

Industrial & Commercial Bank of China Ltd. sank 3.6 percent to HK$5.16. China Construction Bank Corp., the second-biggest mainland lender, declined 2.9 percent to HK$5.80.

Tencent lost 4 percent to HK$392.60 after Chairman Pony Ma told Ming Pao Daily News its valuation will fall if the company doesn’t keep up with trends in technology and Internet businesses.

Noble Group declined 2.8 percent to S$1.05 after third-quarter profit dropped 70 percent after booking a loss related to its stake in coal miner Yancoal Australia Ltd.

Stimulus Outlook

Futures on the Standard & Poor’s 500 Index were little changed today. The measure fell 0.2 percent yesterday as corporate earnings and an improving economy fueled speculation about the Fed’s timetable for reducing stimulus. Fed Bank of Atlanta President Dennis Lockhart said yesterday a reduction in U.S. bond purchases “could very well take place” next month.

“Tapering is obviously back on the agenda as data in the U.S. continues to be strong,” said Donald Williams, Sydney-based chief investment officer at Platypus Asset Management Ltd., which oversees about A$1.6 billion ($1.5 billion). “Maybe that’s enough for a small correction, but I think with rates at very low levels and likely to remain low, it’s still a good environment for equity markets.”

U.S. Economy

Investors will scrutinize U.S. economic reports this week on jobless-benefit claims and manufacturing in the New York area. Economists forecast the central bank will delay tapering asset purchases until its March meeting. Policy makers will probably pare the monthly pace of bond buying to $70 billion from $85 billion at that time, according to the median of 32 estimates in a Bloomberg survey on Nov. 8. The Fed next meets Dec. 17-18.

Among stocks that rose, Pioneer surged 22 percent to 202 yen after posting an operating profit of 569 million yen ($5.7 million) for the six months ended September, beating its break-even forecast. The shares advanced the most since May 14.

Sumitomo Mitsui Financial Group Inc. gained 1.6 percent to 4,945 yen after Japan’s second-biggest lender by market value raised its full-year profit forecast 29 percent.

Relative Value

The Asia-Pacific gauge traded at 13.6 times estimated earnings as of yesterday compared with multiples of 16 for the S&P 500 and 15 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Of the companies on the MSCI Asia Pacific Index that have reported quarterly earnings this season and for which Bloomberg compiles estimates, more than 50 percent exceeded analysts’ profit expectations.

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

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

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