Asian Stocks Drop, Extending Biggest Monthly Retreat Since 2012

  • China pushes local brokerages to step up support for equities
  • Fed's Fischer: Good reason to believe inflation to move higher

Asian stocks extended the biggest monthly drop in three years as investors weighed comments from a weekend meeting of monetary policy makers, with Chinese shares posting their steepest two-month tumble since 2008.

The MSCI Asia Pacific Index fell 0.9 percent to 129.95 as of 8:34 p.m. in Hong Kong, on course to slide 8.5 percent in August. The Shanghai Composite Index declined 0.8 percent amid growing concern that government intervention to prop up the market will fail.

There’s good reason to believe inflation will move higher, Federal Reserve Vice Chairman Stanley Fischer told delegates at the Kansas City Federal Reserve’s annual retreat in Jackson Hole, Wyoming. While Fischer was careful to say he wasn’t signaling an impending rate increase, the remarks suggest the Federal Open Market Committee hasn’t ruled out a move when it gathers in Washington Sept. 16-17.

‘Continued Volatility’

“We are going to continue to see volatility,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which oversees about $118 billion. “The Fed is aware of the market volatility and you wouldn’t have thought they would be raising rates into market turmoil. But at the same time, data coming out of the U.S. has been surprisingly resilient and strong. It’s very difficult for the Fed.”

Traders have pushed the probability of a Fed move next month to 38 percent, from 24 percent on Aug. 26, according to trading in federal-funds futures. They see a 49 percent chance of a move by October.

Japan’s Topix index declined 0.8 percent as the yen strengthened, weighing on exporters. Hong Kong’s Hang Seng Index rose 0.3 percent while the Hang Seng China Enterprises Index of mainland firms listed in the city retreated 0.1 percent. Australia’s S&P/ASX 200 Index slid 1.1 percent, capping its worst month since 2008. New Zealand’s NZX 50 Index slipped 0.3 percent.

China’s securities regulator asked brokerages to step up their support for share prices by contributing 100 billion yuan ($15.7 billion) to the nation’s market rescue fund and increasing stock buybacks, according to people familiar with the matter. The China Securities Regulatory Commission gave the order at a meeting with representatives of 50 brokerages on Saturday, which CSRC Chairman Xiao Gang also attended, said the people who asked not to be identified because the meeting hasn’t been made public.

Bearish wagers in the options market climbed. The cost of bearish contracts on the China 50 exchange-traded fund has surged to the highest level versus bullish ones since they started trading in Shanghai six months ago. The so-called skew also climbed to a record for a similar ETF in the U.S.

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