Most Asian stocks fell as India and Australia raised interest rates before policy meetings this week by the U.S. Federal Reserve and Bank of Japan.
Leighton Holdings Ltd., Australia’s biggest construction company, slumped 7 percent after reporting a writedown on a project. DLF Ltd., India’s biggest developer, sank 3.4 percent. Elpida Memory Inc. and Honda Motor Co. sank at least 2.3 percent in Tokyo on concern a stronger yen will hurt the value of overseas sales. Earnings statements drove up Dena Co., a Japanese operator of shopping websites, and office-equipment maker Brother Industries Ltd. by more than 6 percent.
Five stocks declined for every four that advanced in the MSCI Asia Pacific Index, which rose 0.2 percent to 130.60 as of 7:24 p.m. in Tokyo. The gauge fluctuated today before a Fed policy meeting later today and tomorrow that may herald a new round of monetary easing to bolster the world’s largest economy, according to economists surveyed by Bloomberg News. The index climbed 2.4 percent in October for its second monthly advance.
“The market has been buying in expectation of further quantitative easing in the U.S.,” said Lee King Fuei, a Singapore-based fund manager at Schroders Plc, which held $245 billion of assets as of June. “Clearly, that’s not sustainable. If the first quantitative easing didn’t work in turning around the economy and boosting employment, why a second one would work becomes a bigger question.”
Australia’s S&P/ASX 200 Index rose less than 0.1 percent. It fell earlier after the Reserve Bank of Australia unexpectedly increased the benchmark interest rate by a quarter percentage point. India’s Sensitive Index fluctuated after the central bank raised interest rates for a sixth time this year.
The Nikkei 225 Stock Average gained less than 0.1 percent in Japan, where markets are closed tomorrow for a holiday. The Bank of Japan last week advanced its policy meeting to Nov. 4-5, following the Fed’s meeting.
Taiwan’s Taiex index sank 0.4 percent, while China’s Shanghai Composite Index lost 0.3 percent. New Zealand’s NZX 50 Index gained 0.8 percent after the statistics bureau reported the nation’s wage growth accelerated for the second straight quarter.
Futures on the U.S. Standard & Poor’s 500 Index rose 0.3 percent. The index was little changed yesterday as growth in Chinese and American manufacturing and speculation the Fed will pump cash into the economy overshadowed a report that JPMorgan Chase & Co. was being probed for mortgage deals. The Institute for Supply Management said its factory index climbed last month to the highest level since May.
Leighton tumbled 7 percent to A$33.75 in Sydney after saying an airport infrastructure project will contribute A$85 million ($84 million) in writedowns. Overseas earnings will also be hurt by the stronger Australian dollar, Chief Executive Officer Wal King said in a statement today. The currency climbed as much as 1.3 percent after today’s rate decision.
Shares of Indian property developers declined after the Reserve Bank of India raised interest rates and ordered commercial banks to increase so-called risk weighting on home loans. DLF slumped 3.4 percent to 349.2 rupees. Unitech Ltd., India’s second-biggest developer by assets, dropped 3.4 percent to 86.25 rupees.
Shares of Japanese exporters fell after the yen appreciated to 80.22 yesterday, the strongest level since 1995. It recently weakened to 80.56. A stronger yen lowers the value of Japanese companies’ overseas sales when repatriated.
Elpida, the world’s third-biggest maker of computer-memory chips, slumped 5.1 percent to 764 in Tokyo. Electronics-maker Sony Corp. lost 0.9 percent to 2,627 yen. Honda, Japan’s second-largest carmaker, sank 2.3 percent to 2,725 yen.
“People don’t know whether the yen’s trend will change or not, so they cannot price in strong earnings,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which oversees about $104 billion.
The MSCI Asia Pacific Index increased 8.2 percent in 2010 through yesterday, compared with gains of 6.2 percent by the S&P 500 and 4.9 percent by the Stoxx Europe 600 Index. Stocks in the MSCI measure are valued at an average 14.2 times estimated profit, compared with 14 times for the S&P 500 and 12.2 times for the Stoxx 600.
The Asia Pacific gauge has rallied 12 percent since Fed Chairman Ben S. Bernanke said on Aug. 27 that more securities purchases may be warranted if growth slows. The Fed is likely to start a fresh round of stimulus tomorrow by announcing a plan to purchase at least $500 billion of long-term securities, according to economists surveyed by Bloomberg News.
Waiting For The Fed
“The wait-and-see mood is evident ahead of the major events,” said Park Young Yeol, a fund manager at ING Investment Management Korea Ltd., which manages $16 billion in assets. “Investors are reluctant to make decisive directions in their bets before they get the sense of the magnitude of the Fed’s measures.”
Dena surged 6.9 percent to 2,293 yen in Tokyo today, the MSCI Asia Pacific Index’s fourth-biggest advance, after reporting a fourfold jump in first-half net income. The company said profit jumped to 14.2 billion yen ($176 million) from 3.5 billion yen a year earlier as sales almost tripled.
Brother Industries jumped 6.3 percent to 1,094 yen after raising its full-year profit forecast by 30 percent to 24 billion yen on higher sales.
About 150 companies of almost 1,000 in the MSCI Asia Pacific Index are scheduled to announce earnings this week, according to data compiled by Bloomberg. Since the start of October, about 15 companies have exceeded profit estimates for every 13 that have fallen short, based on Bloomberg data compiled from about 380 companies that have reported quarterly results in that time.
South Korea’s Hanjin Heavy Industries & Construction Co. surged 9.3 percent to 46,000 won, the MSCI Asia Pacific’s biggest advance. The stock was rated a “buy” in new coverage at NH Investment & Securities.