Asian Stocks Outside Japan Drop on Fed, China Concerns

Asian stocks outside Japan fell, with a regional gauge heading for its lowest close since September, on concern the Federal Reserve will reduce stimulus and China’s economic slowdown may deepen amid a cash crunch.

Guangzhou R&F Properties Co. dropped 2.4 percent, pacing losses among Chinese developers even as the nation’s money-market rates retreated from records. Newcrest Mining Ltd., Australia’s No. 1 gold producer, slumped 3.7 percent as the bullion headed for its biggest weekly drop since September 2011. Honda Motor Co. rose 2 percent, leading a rebound among Japanese exporters after the yen weakened.

The MSCI Asia Pacific Excluding Japan Index lost 0.8 percent to 420.43 as of 7:04 p.m. in Hong Kong, paring losses of as much as 1.4 percent. More than two shares fell for each that rose on the measure. Global markets tumbled yesterday after Chairman Ben S. Bernanke said on June 19 the central bank may start dialing down its stimulus effort if the economy achieves sustainable growth, and as money market rates in China surged to record highs.

“People have been buying so much stuff over the last few years because interest rates have been so low,” Mark Matthews, who helps oversee $282 billion as Singapore-based head of Asia research at Bank Julius Baer & Co., said in a Bloomberg Television interview from Hong Kong. “That era is coming to an end and prices will reflect that. The general backdrop to world markets is OK because the U.S. economy is improving. China is the one thing that could upset markets”

Cash Crunch

China’s Shanghai Composite Index slipped 0.5 percent at the close, paring a loss of as much as 2 percent. Hong Kong’s Hang Seng Index fell 0.6 percent and posted its sixth straight weekly decline, the longest losing streak since the 2008 global financial crisis. A gauge of Chinese shares in Hong Kong has lost 24 percent since February 1.

“The economy’s not performing within expectations, the Fed is causing volatility among global markets and our shortage of liquidity is creating a big issue,” Deng Wenyuan, an analyst at Soochow Securities Co., said by phone.

The overnight repurchase rate dropped 442 basis points, or 4.42 percentage points, to 8.43 percent in Shanghai, according to a daily fixing compiled by the National Interbank Funding Center. That is the biggest drop since October 2007 and follows an unprecedented 527 basis point jump yesterday.

South Korea’s Kospi index declined 1.5 percent and Taiwan’s Taiex index slid 1.3 percent. Australia’s S&P/ASX 200 Index dropped 0.4 percent and New Zealand’s NZX 50 Index lost 0.8 percent.

‘Almost Done’

Japan’s Topix index added 0.7 percent, after falling 2.9 percent earlier. The Nikkei 225 Stock Average gained 1.7 percent, erasing losses of as much as 2.4 percent. Both gauges retreated more than 13 percent from their May 22 highs. The Topix has swung an average of 3.2 percent daily since the high.

“Japanese stocks seem almost done with the correction,” said Gentoku Kiyokawa, Tokyo-based head of Japanese investment management at BNP Paribas Investment Partners, which oversees the equivalent of $647 billion.

The benchmark MSCI Asia Pacific Index was little changed at 127.64, paring earlier losses of 1.5 percent and heading for a 2.4 percent decline this week. Shares on the gauge traded at 12.3 times estimated earnings yesterday compared with 14.4 for the Standard & Poor’s 500 Index and 12.6 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Futures on the S&P 500 Index added 0.7 percent. The gauge fell 2.5 percent yesterday, posting its biggest loss since November 2011. About 9.4 billion shares changed hands yesterday in the U.S., the highest volume of the year, according to data compiled by Bloomberg.

Stimulus Exit

The Fed may reduce its $85 billion monthly bond purchases by $20 billion at the end of its September policy meeting, a Bloomberg survey of economists showed.

“The exit from easy monetary policy has begun,” Salman Ahmed, a London-based global strategist at Lombard Odier Investment Managers, which oversees $46 billion, said in an e-mail. “The eventual exit path is uncertain as it will depend on how the U.S. economy evolves from here.”

Chinese developers and lenders declined. Guangzhou R&F Properties sank 2.4 percent to HK$11.56 in Hong Kong. Shimao Property Holdings Ltd., a mainland developer controlled by billionaire Hui Wing Mau, fell 1.8 percent to HK$14.06. Bank of Communications Co., China’s fifth-largest lender by market value, slid 1.9 percent to HK$5.22. China Minsheng Banking Corp. dropped 2.1 percent to HK$7.85.

Newcrest, Zijin

Galaxy Entertainment declined 8.4 percent to HK$39.35 in Hong Kong, the most since October 2011, after JPMorgan cut its recommendation on the stock to neutral from overweight.

Gold producers tumbled as the price of bullion headed for a 6.8 percent decline this week, the biggest weekly drop since September 2011. Newcrest Mining sank 3.7 percent to A$10.35 in Sydney. Zijin Mining Group Co., China’s biggest bullion producer, slumped 6 percent to HK$1.58 in Hong Kong.

Japanese exporters advanced as the yen headed for a fifth day of decline. A weaker currency boosts the value of overseas income at carmakers and electronics manufacturers when repatriated. Honda, which gets about 83 percent of sales outside of Japan, gained 2 percent to 3,580 yen. Canon Inc., the world’s biggest camera maker, rose 1.7 percent to 3,270 yen.