Asian Stocks Outside Japan Rise Before U.S. Fed Meeting

Asian stocks rose, with a regional index that excludes Japanese shares heading for its highest close in 16 months, ahead of a Federal Reserve policy meeting and as investors await progress on U.S. budget talks.

BHP Billiton Ltd., the world’s biggest mining company, added 1.3 percent in Sydney after metal prices rose. STX Offshore & Shipbuilding Co. jumped 7.2 percent in Seoul after a report the shipbuilder’s parent was to selling a unit that makes offshore vessels. Kansai Electric Power Co. led Japanese utilities lower after regulators said an active earthquake fault may be running under a nuclear reactor.

The MSCI Asia Pacific Excluding Japan Index advanced 0.3 percent to 460.45 as of 7:23 p.m. Tokyo time, heading for its highest close since Aug. 3, 2011. About the same number of shares rose as fell on the gauge. The measure climbed the past three weeks on signs of recovery in the world’s two largest economies and optimism U.S. lawmakers will make a budget deal to avert the so-called fiscal cliff.

“The only risk would be if there’s no resolution of the U.S. fiscal cliff, but I think that’s unlikely,” said Shane Oliver, Sydney-based head of strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “The more likely scenario is that shares continue to rise next year as the U.S. economy picks up momentum.”

The MSCI Asia Pacific Index that includes Japan advanced 11 percent this year through yesterday as central banks took steps to support economic growth. That compares with a 13 percent gain for the S&P 500 and 14 percent for the Stoxx Europe 600 Index. The Asian gauge traded at 14.2 times estimated earnings, compared with 13.7 times for the S&P 500 Index and 12.6 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Utilities Drop

Australia’s S&P/ASX 200 Index and South Korea’s Kospi Index both rose 0.4 percent. The Philippine Stock Exchange Index jumped 1.3 percent to close at a record. Hong Kong’s Hang Seng Index gained 0.2 percent. The BSE India Sensitive Index fell 0.1 percent, reversing gains as much as 1 percent.

Japan’s Nikkei 225 Stock Average slipped 0.1 percent. The Topix Index, the country’s broadest measure of equities, dropped 0.3 percent as utilities tumbled. The power producers were among the biggest drags on the MSCI Asia Pacific Index, which includes Japanese companies.

China’s Shanghai Composite Index dropped 0.4 percent, erasing gains of as much as 0.2 percent. New lending by the country’s banks increased to 522.9 billion yuan ($84 billion) in November. That compares with 562.2 billion yuan a year earlier and the 550 billion yuan median estimate by 30 economists surveyed by Bloomberg.

Market Breather

“The market needs to take a breather here after its decent rally,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “The market will probably continue to go up after the consolidation given the recent positive signs that the economy is bottoming out.”

Economic data are giving a mixed picture of the outlook for the world’s second-biggest economy, with China’s exports rising less than forecast last month even as industrial output accelerated.

Futures on the Standard & Poor’s 500 Index climbed 0.2 percent today. The gauge gained less than 0.1 percent yesterday as economic data in China beat estimates and investors weighed prospects for a U.S. budget deal.

Federal Reserve policy makers begin a two-day meeting today that will be followed by updated projections on economic growth, unemployment, inflation and interest rates on Dec. 12. Fed officials are considering whether to supplement $40 billion a month of mortgage-bond purchases with Treasury purchases when their Operation Twist program expires at the end of the month.

Budget Talks

Separately, U.S. lawmakers need to agree on a budget to prevent more than $600 billion of automatic tax increases and spending cuts from coming into effect next year. President Barack Obama and Republican House Speaker John Boehner met one-on-one at the weekend at the White House. Representatives for the two said in statements afterward that “the lines of communication remain open.”

“The market now seems stuck in a trading range until news from Washington about any progress or deterioration in budget negotiations is released,” said Matthew Sherwood, head of markets research at Perpetual Investment, which manages about $25 billion in Sydney.

Mining companies advanced after the London Metals Exchange Index, which tracks the prices of commodities from aluminum to copper, climbed 1.9 percent yesterday, extending gains for a second day. BHP Billiton gained 1.3 percent to A$35.41 in Sydney. Rio Tinto Group, the world’s second-biggest mining company, added 0.8 percent to A$61.77.

Safety Tests

STX Offshore jumped 7.2 percent to 7,430 won in Seoul. STX Group may announce the sale of its 51 percent stake in offshore vessel-maker STX OSV Holdings Ltd. to Fincantieri SpA “soon,” MoneyToday said, citing unidentified officials familiar with the deal.

Kweichow Moutai Co., China’s second-biggest liquor maker, rose 1.8 percent to 202.31 yuan in Shanghai after the company said safety tests conducted this year showed the company’s products met government standards for three chemicals.

Giant Manufacturing Co. added 1.2 percent to NT$163 in Taipei after the world’s largest bicycle maker said sales in November climbed 25 percent from a year earlier to NT$2.21 billion ($76 million).

Skyworth Digital Holdings Ltd. rose 2.4 percent to HK$4.19 in Hong Kong after saying total television sales increased 44 percent in November from a year earlier.

Earthquake Risk

Japanese utilities declined. The Nuclear Regulation Authority said earthquake risk may prevent the restart of a reactor operated by the Japan Atomic Power Co.

Kansai Electric dropped 4.4 percent to 742 yen. Chubu Electric Power Co. slid 4.1 percent to 1,041 yen. Tokyo Electric Power Co., owner of the power plant at the center of last year’s nuclear disaster, fell 1.4 percent to 138 yen.

“Prospects for restarting the nuclear reactors are slowly being squashed, and that’s going to increase the cost of electricity,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd. in Tokyo, which has about $400 billion in assets.

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