Asian Stocks Weaken as Fed Flags Earlier Stimulus Paring

Asian stocks weakened after minutes of a Federal Reserve meeting signaled bond purchases may be cut sooner than expected, erasing earlier gains made after China outlined its broadest economic reforms since the 1990s.

Newcrest Mining Ltd. slipped 11 percent, pacing declines among gold producers as prices for the precious metal dropped on Fed tapering bets. Citic Securities Co. jumped 14 percent in Hong Kong, leading gains among Chinese brokerages as the government flagged policy changes that may lead to ending the ban on mainland initial public offerings. Honda Motor Co. (7267) rose 5 percent, leading Japanese exporters higher as the yen headed for its longest streak of weekly losses since February.

About five shares gained for every four that fell on the MSCI Asia Pacific Index, which declined 0.2 percent to 141.23 this week. The measure advanced 9 percent this year through yesterday on bets the Fed will maintain record stimulus, the Bank of Japan’s efforts to weaken the yen and signs China’s economy is improving.

“Overall the underlying sentiment is quite bullish, especially towards Chinese companies,” said Alex Wong, a Hong Kong-based director at Ample Capital Ltd. “People are still chasing China stocks as they remain bullish on sectors like insurers, securities and coal. Positive sentiment is being carried forward by the plenum.”

Chinese shares are on the cusp of a historic bull run, according to a research note from Jefferies Group LLC. Comprehensive reform decisions from the Communist Party plenum impressed “tremendously,” with a significance rivaling that of Deng Xiaoping declaring the opening of China in 1978, analysts led by Christie Ju wrote in a note.

China Liberalization

China’s leaders pledged reforms that include allowing more private investment in state-controlled industries and loosening the one-child policy, according to a Communist Party statement published by Xinhua News Agency on Nov. 15. Details of the policy shift lifted baby product makers to insurers. The government is liberalizing its policies in an effort to bolster an economy that’s heading for its weakest annual expansion since 1999.

The Hang Seng China Enterprises Index (HSCEI) advanced 7 percent this week, the biggest weekly gain since December 2011. Hong Kong’s benchmark Hang Seng Index advanced 2.9 percent, and the Shanghai Composite Index added 2.8 percent.

Japan’s Topix index climbed 0.8 percent this week as the yen fell below 100 against the dollar for the first time since July. Bank of Japan Governor Haruhiko Kuroda said in parliament yesterday in Tokyo that the yen isn’t “excessively weak.” The central bank this week maintained its unprecedented monetary policy. The central bank will need to extend the timeframe for reaching 2 percent inflation as it refrains from enlarging its asset purchases, according to economists surveyed by Bloomberg.

Fed Tapering

Other markets in Asia declined amid concern the Fed will soon taper stimulus. Minutes of the central bank’s October meeting released this week showed policy makers expect ongoing improvement in the labor market to “warrant trimming the pace of purchases in coming months.” Fed Bank of St. Louis President James Bullard also told Bloomberg Television that a reduction in the $85 billion-a-month bond-buying program was “on the table” for next month.

The U.S. Senate Banking Committee on Nov. 21 voted 14-8 to approve Janet Yellen as the next chairman of the Fed, sending the nomination to the full Senate for approval. Yellen, a vocal proponent of accommodative policy, has said an early exit from stimulus would put a fragile U.S. economic recovery at risk.

Australia’s S&P/ASX 200 Index slipped 1.2 percent, while New Zealand’s NZX 50 Index dropped 2 percent. South Korea’s Kospi index was little changed. Taiwan’s Taiex Index lost 0.7 percent. Singapore’s Straits Times Index declined 0.9 percent.

Relative Value

The MSCI Asia Pacific Index yesterday traded at 13.8 times estimated earnings, compared with 16.3 on the Standard & Poor’s 500 Index and 15.1 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Chinese brokerages advanced. Policy makers will seek to “push forward reform for a registration system” on IPOs, according to a Nov. 15 statement posted on the Chinese government’s website detailing decisions from a Beijing meeting of the Communist Party’s Central Committee this month.

Citic Securities (6030), the nation’s biggest brokerage, jumped 14 percent to HK$18.94 in Hong Kong. Haitong Securities Co. climbed 11 percent to HK$12.94.

Mainland infant-formula makers gained after the Communist Party said it would ease restrictions on having two children. China Mengniu Dairy Co. rose 3.4 percent to HK$34.65. China Modern Dairy Holdings Ltd. climbed 7 percent to HK$4.28.

Glorious Property Holdings Ltd. surged 33 percent to HK$1.65 after Chinese billionaire Zhang Zhirong, the company’s largest shareholder, offered as much as HK$4.57 billion ($589 million) to take the Chinese developer private.

Japanese Exporters

Japanese exporters advanced. Honda, which gets about 83 percent of sales outside of Japan, climbed 5 percent to 4,295 yen this week in Tokyo. Sony Corp., the maker of Bravia televisions and PlayStation game consoles, added 1.6 percent to 1,875 yen.

SoftBank Corp. jumped 5.3 percent to 8,150 yen. Third Point LLC, the hedge fund run by activist Daniel Loeb, has taken a stake in the Japanese wireless carrier valued at more than $1 billion, according to a person with knowledge of the matter.

Gold producers declined as bullion sank to its lowest since July 9. Newcrest Mining fell 11 percent to A$8.50 in Sydney. Zijin Mining Group Co., China’s biggest gold producer, lost 2.2 percent to HK$1.80.

WorleyParsons Ltd., Australia’s largest oil and gas engineering company, slumped 26 percent to A$16 after saying profit will miss forecasts.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net

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

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