Asian Stocks Fall to Two-Week Low on Fed Reserve Speculation

Most Asian Stocks Rise on Profits
Japan’s Nikkei 225 Stock Average climbed 0.6 percent. Photographer: Tomohiro Ohsumi/Bloomberg

Asian stocks fell, dragging down the MSCI Asia Pacific Index by the most in almost two weeks on speculation a possible Federal Reserve asset-purchase program that may be announced next week will disappoint investors.

Rio Tinto Group, the world’s No. 3 mining company, sank 2 percent in Sydney after oil and copper prices declined. BYD Co., the Chinese carmaker backed by Warren Buffett, tumbled 8.9 percent in Hong Kong after JPMorgan Chase & Co. downgraded the stock. Asciano Group, Australia’s largest port and rail operator, slumped 4.3 percent after saying it’s more cautious on its full-year outlook. Honda Motor Co. gained 1.9 percent as a weaker yen boosted the outlook for export earnings.

The MSCI Asia Pacific Index dropped 1.2 percent, the most since Oct. 12, to 128.87 as of 7:23 p.m. in Tokyo. The Fed may announce a program of U.S. Treasury purchases worth a few hundred billion dollars at its Nov. 2-3 meeting, the Wall Street Journal reported today. The ultimate size of the asset-purchase program range could reach $2 trillion, according to Goldman Sachs estimates.

“Ahead of the Federal Reserve meeting next week, I’d look to take some profit,” said Chris Leung, a Hong Kong-based portfolio manager at Taifook Asset Management Ltd. “As economic data turns stronger, I doubt whether the Fed is going to push the size of quantitative easing. There might be a chance that it won’t meet market expectation.”

Hong Kong’s Hang Seng Index slumped 1.9 percent and China’s Shanghai Composite Index sank 1.5 percent. South Korea’s Kospi Index decreased 0.5 percent. Australia’s S&P/ASX 200 Index dropped 0.9 percent. Japan’s Nikkei 225 Stock Average gained 0.1 percent.

Copper, Oil

Futures on the Standard & Poor’s 500 Index fell 0.5 percent. The index was little changed yesterday in New York, with most stocks declining as results from companies including Kimberly- Clark Corp. and U.S. Steel Corp. disappointed some investors.

Gauges of raw-material suppliers and energy companies posted the biggest declines among the 10 industry groups on the MSCI Asia Pacific Index. Copper futures in London dropped 0.8 percent, while crude oil prices in New York sank 0.5 percent in electronic after-hours trading.

Rio Tinto slid 2 percent to A$82.35. BHP Billiton Ltd., the world’s biggest mining company, fell 0.8 percent to A$41.49. Jiangxi Copper Co., China’s largest producer of the metal, lost 4.4 percent to HK$21.75. Cnooc Ltd., the nation’s No.1 offshore energy explorer, sank 2.5 percent to HK$15.76.

Buffett’s BYD

In Sydney, Macarthur Coal Ltd., the world’s largest producer of pulverized coal used in making steel, sank 3.5 percent to A$12.13. The company forecast first-half profit of A$115 million ($112 million) to A$125 million, missing some analysts’ estimates.

BYD declined 8.9 percent to HK$46.50, the biggest drop on the MSCI Asia Pacific Index, after JPMorgan lowered its rating to “underweight” from “neutral.”

Tokyo-based Mitsui Chemicals Inc. tumbled 6.7 percent to 237 yen, the MSCI index’s third-largest slump. Its stock-price estimate was lowered to 330 yen from 350 yen by Hisaaki Yokoo, an analyst at Goldman Sachs.

Asciano slumped 4.3 percent to A$1.565. The company’s first-quarter coal shipments missed its expectations, making the management “slightly more cautious” about the full-year outlook, Chief Executive Officer Mark Rowsthorn said in a statement.

Asset Purchases

More than two stocks declined for each that advanced in the MSCI Asia Pacific Index today. The gauge dropped for the first week in two months last week after China unexpectedly raised interest rates and said its economy grew at the slowest pace in a year. Companies in the index are valued at an average 14.1 times estimated profit, up from about 13.5 times on Aug. 25, when the gauge fell to a one-month low.

“I’m a bit cautious at the moment,” Taifook Asset’s Leung said. “In the short term, expect Asian markets to see a correction.”

The gauge has risen from the August low as concerns about the strength of global economic growth eased. Fed Chairman Ben S. Bernanke is likely to preside over a decision next week to launch another round of large-scale asset purchases after deploying $1.7 trillion to pull the U.S. economy out of the financial crisis, comments from policy makers in the past week indicate.

Weaker Yen

Concerns have “increased that the amount of money in the markets will be smaller and that may slow the speed of gains in stock market,” said Hideaki Higashi, strategist at SMBC Friend Securities Co.

Japanese exporters advanced after the yen depreciated to 81.76 against the dollar at the close of trading in Tokyo today from 80.68 at yesterday’s close. A weaker yen boosts the value of overseas income at Japanese companies when converted into their home currency.

Honda, a carmaker that gets more than 80 percent of its revenue outside Japan, gained 1.9 percent to 2,960 yen. Toyota Motor Corp., the world’s largest automaker, increased 1.5 percent to 2,910 yen. Sony Corp., the maker of Bravia televisions and PlayStation game consoles, rose 0.6 percent to 2,757 yen.

National Australia Bank Ltd. climbed 2.1 percent to A$25.26. Chief Executive Officer Cameron Clyne predicted a stronger economy will drive demand for corporate loans next year after the lender said second-half cash profit increased 32 percent.

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