Asian Stocks Fall, Paring Monthly Gain, on U.S. Budget

Asian stocks fell, with the benchmark index paring its biggest monthly gain since 2012, on concern the U.S. government is headed for a shutdown amid a budget stalemate.

Toyota Motor Corp., which gets 31 percent of its revenue in North America, declined 2.6 percent. Mizuho Financial Group Inc., Japan’s third-largest bank, sank 4.1 percent after its lending unit was penalized by Japan’s banking regulator for failing to end transactions with “anti-social” groups. BHP Billiton Ltd., Australia’s biggest oil producer, dropped 1.7 percent as crude fell.

The MSCI Asia Pacific Index dropped 1.5 percent to 138.65 as of 5:10 p.m. in Tokyo, with all 10 industry groups on the gauge falling. It’s headed for a 6.5 percent increase this month, the most since January 2012, and is up 6.2 percent this quarter. Even if Congress resolves the budget fight by the Oct. 1 deadline, U.S. lawmakers would move to the next fiscal dispute over raising the $16.7 trillion debt ceiling.

“There’s no agreement among the government at the moment, and if they can’t agree on the budget, there’s no way they are going to agree on the debt ceiling,” said Andrew Sullivan, director of sales trading at Kim Eng Securities in Hong Kong. “It’s the end of quarter and so you may see people looking to sell into the recent strength, locking gains, on expectations the U.S. government does shut down.”

The September gains pushed valuations on the Asia-Pacific measure to 13.7 times estimated earnings as of Sept. 27 from 12.7 at the end of August, according to data compiled by Bloomberg. That compares with 15.4 for the Standard & Poor’s 500 Index and 14.3 for the Stoxx Europe 600 Index, the data show.

Regional Gauges

Japan’s Topix index slumped 1.9 percent as the yen gained, weighing on exporters, and a report showed industrial production fell more than expected in August. Prime Minister Shinzo Abe is scheduled to speak tomorrow on his plans for a sales-tax increase and an economic-support package.

South Korea’s Kospi index lost 0.7 percent and New Zealand’s NZX 50 Index dropped 1 percent. Australia’s S&P/ASX 200 Index fell 1.7 percent, paring its biggest quarterly gain in four years as record-low interest rates boost profits. Taiwan’s Taiex Index slipped 0.7 percent and Singapore’s Straits Times Index fell 0.8 percent.

Hong Kong’s Hang Seng Index dropped 1.5 percent. China’s Shanghai Composite Index rose 0.7 percent. Hong Kong’s markets are shut tomorrow for a holiday, while today was the last day of trading for mainland markets until Oct. 8.

Budget Impasse

Futures on the S&P 500 Index slipped 0.8 percent today after the gauge declined 0.4 percent on Sept. 27. Congress is leaving itself just one day to end a budget stalemate that raises the risk of the first government shutdown in 17 years.

The House of Representatives voted 231-192 yesterday to stop many of the Affordable Care Act’s central provisions for one year, tying it to an extension of U.S. government funding through Dec. 15. Should the Senate reject the bill today the government could be shut down from tomorrow.

Companies that do business in the U.S. dropped. Toyota, Asia’s biggest carmaker, declined 2.6 percent to 6,270 yen. Honda Motor Co., a Japanese carmaker that generates 47 percent of its sales in North America, fell 2.7 percent to 3,735 yen. James Hardie Industries SE, a building materials supplier that gets about 70 percent of sales from the U.S., slid 2.1 percent to A$10.68 in Sydney.

The Purchasing Managers’ Index for China from HSBC Holdings Plc and Markit Economics rose to 50.2 in September from 50.1 in August, data showed today. The final number was less than last week’s 51.2 preliminary reading and the 51.2 median estimate in a Bloomberg News survey of economists.

Gangster Loans

Mizuho Financial sank 4.1 percent to 213 yen. Japan’s Financial Services Agency said on Sept. 27 it ordered Mizuho’s banking unit to strengthen legal compliance and controls after it failed to prevent more than two years of transactions with “anti-social” groups, a term commonly used in Japan to describe yakuza crime syndicates. Through consumer credit companies, Mizuho Bank Ltd. made 230 loans valued at about 200 million yen ($2 million), the FSA said.

Energy producers dropped as crude oil fell to the lowest price in almost three months on concern over the U.S. budget and speculation threats to the Middle East oil supply are subsiding.

BHP Billiton lost 1.7 percent to A$35.74 in Sydney. Energy explorer PetroChina Co. slid 1.7 percent to HK$8.56 in Hong Kong.

Daphne International Holdings Ltd., a footwear maker that sells Aerosoles shoes in China, tumbled 10 percent to HK$4.73 in Hong Kong. Third-quarter sales remained weak, KGI Securities Co. said in a note on Sept. 27, citing the company’s investor relations department.

Among stocks that rose, Power Assets Holdings Ltd. controlled by Asia’s richest man, Li Ka-shing, climbed 2.6 percent to HK$69.40 in Hong Kong. The company said it plans to sell as much as a 70 percent stake in the electricity division through a business trust structure. The spinoff may raise $5 billion, said two people with knowledge of the plan.