Asian Stocks Decline as Japanese Shares Fall on Stronger Yen

  • Yen gains toward 100 vs dollar amid fading Fed rate hike bets
  • Shanghai Composite drops for the first time in three days

Asian stocks retreated from a one-year high after Japanese shares sank as the yen advanced toward 100 per dollar.

Around two shares declined for each that rose on the MSCI Asia Pacific Index, which fell 0.1 percent to 139.69 as of 4 p.m. in Hong Kong. Japan’s Topix index closed down 1.4 percent, erasing earlier gains. The yen strengthened 1 percent as the greenback fell against all its major developed peers after investors trimmed bets the Federal Reserve will raise interest rates this year.

“The yen is being driven by the dollar’s weakness, spurred by increasing expectations the Federal Reserve won’t raise rates this year,” said Nicholas Teo, a strategist at KGI Fraser Securities in Singapore. “This complicates things for Japanese policy makers seeking to stimulate Japan’s economy. If the Fed doesn’t move this year, there’s a risk of steeper moves next year. That’s very dangerous.”

Asian stocks have climbed 24 percent from their February low as lackluster data from the world’s biggest economies fueled speculation central banks will continue to support them with stimulus and loose monetary policy. Even with the rally, shares on the MSCI Asia Pacific Index were trading at 14.3 times estimated earnings, compared with 17.1 times for a gauge of global equities, according to data compiled by Bloomberg.

‘Compelling Buy’

“Equities continue to be a very compelling buy given the low and even negative bond yields in some countries,” said Angus Nicholson, a markets analyst at IG Ltd. in Melbourne. “The resurgence of commodities amid prospects of further stimulus from China, Japan and EU is also beneficial for equities. While U.S. equity valuations look stretched, the valuations in emerging market Asia aren’t crazy.”

Trading on the Topix was thin for a second day, with volume 20 percent below the 30-day average. Japanese shares have fallen 0.7 percent since July 28, the day before the BOJ announced it would almost double its purchases of ETFs to 6 trillion yen ($60 billion) a year. Still, the gauge is down 16 percent this year, the worst performing developed market after Italy.

China’s Shanghai Composite Index fell 0.5 percent after rising above its 200-day moving average for the first time in a year as volume rebounded. While the gauge has climbed 17 percent from its January low, it’s still down 40 percent from last year’s peak.

Merger Speculation

Shanghai shares surged 2.4 percent Monday, lifted by speculation merger activity in the real estate industry will increase and the central bank will add to stimulus. Stocks in Shenzhen and Hong Kong also gained after the securities regulator said a long-delayed exchange link between the two cities will start in 2016. Hong Kong’s Hang Seng Index declined 0.1 percent on Tuesday.

New Zealand’s S&P/NZX 50 Index sank 1.1 percent, retreating from an all-time high. Australia’s S&P/ASX 200 Index fell 0.1 percent, its first decline in three days. South Korea’s Kospi index slipped 0.1 percent, Taiwan’s Taiex Index lost 0.4 percent and Singapore’s Straits Times Index was little changed.

Cyberdyne Inc. plunged 6.8 percent in Tokyo after short-seller Citron Research said shares of the Japanese maker of robot exoskeletons for patients with spinal difficulties were poised to drop. The report is malicious and contains factual inaccuracies, Cyberdyne Chief Financial Officer Shinji Uga said. Infosys Ltd. fell 1.1 percent in Mumbai after losing a technology contract from Royal Bank of Scotland Group Plc.

China Everbright International Ltd. advanced 6.6 percent in Hong Kong after the developer of water and environmental protection projects said it plans to spin off China Everbright Greentech Ltd., which builds biomass, solar and wind power plants, by year-end.

Futures on the S&P 500 Index declined 0.2 percent. All three American equity benchmarks climbed Monday, with the S&P 500 advancing to a record amid deal activity and as crude oil extended gains to boost commodity producers.

Oil traded above $45 amid speculation that producers will revive talks on stabilizing prices. West Texas Intermediate crude futures rose 0.3 percent Tuesday after climbing 2.8 percent on Monday. Prices advanced last week as Saudi Arabia signaled it’s prepared to discuss stabilizing markets at informal OPEC discussions next month.

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