Asian Stocks Drop Second Day Amid Concern Fed Will Taper

Asian stocks declined to their lowest level in two months as investors speculate the U.S. budget deal will give the Federal Reserve confidence to curb stimulus as soon as next week.

Doosan Heavy Industries and Construction Co. lost 4.5 percent in Seoul after the maker of factory equipment said it will sell 9.5 million treasury shares. QBE Insurance Group Ltd. declined 5.5 percent in Sydney, extending this week’s slump to 33 percent, as Fitch Ratings cut the outlook on Australia’s second-largest insurer by market value to negative from stable. Full Speed Inc. surged the most in two months after the Internet-marketing company returned to profit.

The MSCI Asia Pacific Index slid 0.9 percent to 138.51 at 7:15 p.m. in Hong Kong, falling for a second day as all 10 industry groups on the gauge dropped. The budget compromise forged by U.S. lawmakers, which will ease automatic spending cuts and reduce the deficit, comes after 34 percent of economists surveyed by Bloomberg on Dec. 6 said the Fed will begin paring its $85 billion in monthly bond purchases when it meets Dec. 17-18.

“There is risk of a short-term correction in shares,” Shane Oliver, who helps oversee $131 billion as head of investment strategy at AMP Capital Investors Ltd. in Sydney, said. The risk is “we see a combination of Fed tapering and a faster growth acceleration. After the rapid gains of the last two years, shares are no longer dirt cheap. As a result, returns are likely to be more constrained and volatile.”

Regional Gauges

Japan’s Topix index slid 0.7 percent. Australia’s S&P/ASX 200 Index lost 0.8 percent, falling for a sixth day in the longest losing streak in 17 months. South Korea’s Kospi index retreated 0.5 percent as Doosan Heavy lost 4.5 percent to 32,000 won. New Zealand’s NZX 50 Index added 0.1 percent.

Hong Kong’s Hang Seng Index dropped 0.5 percent, while China’s Shanghai Composite decreased 0.1 percent. Taiwan’s Taiex Index slipped 0.9 percent, while Singapore’s Straits Times Index retreated 0.1 percent. India’s S&P BSE Sensex Index lost 1.2 percent.

Futures on the S&P 500 were little changed today. The gauge completed its biggest back-to-back drop in two months yesterday as the congressional budget accord fueled speculation the Fed may trim stimulus next week.

Foreigners are boosting holdings of Japanese stocks by the most on record, putting more at stake for overseas investors as Prime Minister Shinzo Abe seeks to revive the world’s third-largest economy.

Japanese Equities

Buyers from outside Japan pumped 12.9 trillion yen ($126 billion) into the nation’s stocks this year through November, Tokyo Stock Exchange data show. The Topix index has climbed 44 percent in 2013 to lead 24 developed markets tracked by Bloomberg. The inflows surpassed the previous highest total in 2005, which preceded a 1.9 percent increase for the Topix the following year.

Three samples collected from two live poultry markets in the southern Chinese city bordering Hong Kong tested positive for the H7N9 avian influenza virus, Guangdong province’s health department said yesterday. Hong Kong has activated part of a pandemic preparedness plan.

The health authority examined 70 samples from 13 live poultry markets in Shenzhen, according to a statement on the departmental website. Risk of human infection from the virus is “very high,” it said.

QBE slumped 5.5 percent to A$10.40. The insurer tumbled 33 percent this week after forecasting an unexpected loss due to writedowns at its North American operations. Fitch yesterday cut its outlook on QBE to negative from stable and lowered its debt rating to A-.

Full Speed soared 19 percent to 940 yen in Tokyo after reporting first-half net income of 151 million yen, compared with a 554 million yen loss a year ago.

China Cinda Asset Management Co. (1359), one of the nation’s four state-backed bad-loan managers, jumped 26 percent to HK$4.50 in Hong Kong on its first trading day. Cinda raised $2.5 billion in Asia’s second-biggest initial public offering this year.

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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