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Asia Stocks Post Biggest Weekly Drop Since August on Fed

Asian stocks fell this week, with the regional benchmark gauge declining the most since August, amid concern improving U.S. economic data will spur the Federal Reserve to pare stimulus as soon as this month.

Toyota Motor Corp. (7203), Japan’s carmaker that gets 31 percent of its revenue in North America, sank 2.5 percent. Qantas Airways Ltd. (QAN) slumped 16 percent after Australia’s largest carrier said it will post a record first-half loss and Standard & Poor’s cut its credit rating to junk. Standard Chartered Plc dropped 7.7 percent in Hong Kong after the lender said full-year operating profit from consumer banking will decline at least 10 percent, hurt by its Korean business.

The MSCI Asia Pacific Index retreated 1.8 percent this week to 139.47, the most since the week ended Aug. 23. More than $7 trillion has been added to the value of global equities this year, the most since 2009, as central banks took steps to shore up economies worldwide. Fed policy makers meet Dec. 17-18 after minutes of their last meeting in October showed they may reduce $85 billion of monthly bond buying should the U.S. economy improve.

“This to me signals profit taking and a flight to safety,” Evan Lucas, Melbourne-based market strategist at IG Ltd., said in an e-mail. “There is no denying U.S. optimism and economic growth is accelerating. Any signs employment is accelerating faster than expected mean the timing of taper will come forward, and that is being taken as equity adverse, and will drive these markets lower.”

The share of economists predicting the Fed will taper bond purchases this month doubled after a government report yesterday showed back-to-back monthly payroll gains of 200,000 or more for the first time in almost a year.

The Federal Open Market Committee will probably begin reducing $85 billion in monthly bond buying at a Dec. 17-18 meeting, according to 34 percent of economists surveyed yesterday by Bloomberg, an increase from 17 percent in a Nov. 8 survey.

Yearly Rally

The MSCI Asia Pacific Index gained 7.8 percent this year as central banks boosted stimulus to support growth globally and China’s economy showed signs of stabilization. The gauge this week touched 14 times estimated earnings, the highest level since May, compared with multiples of 16.2 for the Standard & Poor’s 500 Index and 14.9 for the Stoxx Europe 600 Index yesterday, according to data compiled by Bloomberg.

The U.S. in the last quarter posted the fastest annualized growth since the start of 2012 and jobless claims unexpectedly fell, reports showed this week.

Pacific Investment Management Co.’s Bill Gross, manager of the world’s biggest bond fund, said the unprecedented cash added to the financial system by central banks is raising the risk of a slide in global asset prices.

“Investors are all playing the same dangerous game that depends on a near-perpetual policy of cheap financing and artificially low interest rates in a desperate gamble to promote growth,” Gross wrote in his monthly investment outlook posted on Newport Beach, California-based Pimco’s website.

Regional Gauges

Australia’s S&P/ASX 200 Index (AS51) declined 2.5 percent, its biggest weekly slide since June. Japan’s Topix index fell 1.8 percent, the most since October. South Korea’s Kospi index lost 3.2 percent, Singapore’s Straits Times Index dropped 2 percent and New Zealand’s NZX 50 Index sank 1.7 percent. Hong Kong’s Hang Seng Index slid 0.6 percent and China’s Shanghai Composite rose 0.8 percent. Taiwan’s Taiex Index declined 0.5 percent.

Companies that do business in the U.S. fell. Toyota slid 2.5 percent to 6,220 yen. Nissan Motor Co., a carmaker that generates 34 percent of its revenue out of North America, declined 4.2 percent to 897 yen in Tokyo.

This year, Bank of Japan Governor Haruhiko Kuroda helped drive a 44 percent surge in Japan’s Topix by maintaining monetary easing as he and Prime Minister Shinzo Abe sought to jolt the nation out of 15 years of deflation. The Topix is the best performing of 24 developed markets tracked by Bloomberg.

Not Optimistic

Chinese President Xi Jinping said the environment for economic and social development next year isn’t optimistic, in a signal that leaders may be willing to accept slower growth in 2014.

“While the overall situation is good, the environment for economic and social development next year is not optimistic,” Xinhua said, paraphrasing remarks made by Xi. He said reform should be integrated into all sectors.

Qantas Sinks

Qantas sank 16 percent to A$1.03 this week. The rating on Australia’s largest carrier was cut to BB+, one level below investment grade, S&P said in a statement, citing increased competition and the airline’s forecast financial loss. The airline said Dec. 5 that it will lose between A$250 million and A$300 million in the six months ending Dec. 31.

Standard Chartered retreated 7.7 percent to HK$169.20. Operating profit at the division “is now expected to be down by a double-digit rate,” while revenue is seen increasing “at a low single-digit rate” in 2013, the London-based bank said in a statement.

Toppan Printing Co. lost 6.9 percent to 771 yen in Tokyo after saying it will sell 80 billion yen ($777 million) of convertible bonds.

Among shares that rose this week, GungHo Online Entertainment Inc. advanced 13 percent to 75,500 yen in Tokyo after it started offering its ‘Puzzle & Dragons’ game in six European countries. Citic Pacific Ltd. (267) surged 7.7 percent to HK$12.04 in Hong Kong after saying its Sino Iron project in Western Australia shipped its first iron ore concentrate.

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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