Asian Stocks Outside Japan Decline After Hawkish Fed Comments

  • Cathay Pacific plunges in Hong Kong as earnings miss estimates
  • Topix rises as yen halts advance after touching 100 per dollar

Maher: Yen Can Strengthen to 80 If Abenomics Fails

Asian stocks outside of Japan fell for the first time in four days after hawkish comments from Federal Reserve officials. Shares in Tokyo climbed as the yen halted its advance after briefly surpassing 100 per dollar.

The MSCI Asia Pacific Excluding Japan Index slipped 0.6 percent to 449.02 as of 4:36 p.m. in Hong Kong. The gauge had rallied 25 percent from a January 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. New York Fed President William Dudley said Tuesday the central bank could potentially raise interest rates as soon as next month, warning investors that they are underestimating the likelihood of increases in borrowing costs.

“Comments from Dudley certainly knocked the wind off the market rally,” said Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, which manages about $21 billion. “The market has had a tremendous rally and is probably due for a pullback.”

While the odds the Fed will raise rates in December climbed to 51 percent on Tuesday, from 45 percent the previous day, traders are betting there’s only a 22 percent chance of tightening next month, data compiled by Bloomberg showed. Dudley said markets were “too complacent” on the outlook. Atlanta Fed chief Dennis Lockhart also chimed in, saying he’s confident growth is accelerating enough for at least one hike in 2016.

Cathay Pacific Plunges

Hong Kong’s Hang Seng Index dropped 0.5 percent. Cathay Pacific Airways Ltd. tumbled 7.3 percent, leading declines on the city’s benchmark index, after Asia’s biggest international airline reported first-half profit that missed analyst estimates.

Singapore’s Straits Times Index slipped 0.5 percent, heading for the lowest close in almost two weeks. The island nation’s exports plunged the most in four months as orders from China, Indonesia and the U.S. dropped. South Korea’s Kospi index fell 0.2 percent.

India’s BSE S&P Sensex lost 0.2 percent, erasing earlier gains of as much as 0.4 percent. The Philippine Stock Exchange Index declined 0.5 percent. Australia’s S&P/ASX 200 Index added 0.1 percent. New Zealand’s S&P/NZX 50 Index climbed 0.6 percent.

Topix Resilience

Japan’s Topix index advanced 1 percent, after sliding 1.4 percent on Tuesday. The yen retreated 0.5 percent to 100.83 to the dollar after surging the previous day to break through 100 for the second time this year.

Strategists at Bank of Tokyo-Mitsubishi UFJ Ltd. and Morgan Stanley see the yen extending this year’s 20 percent gain versus the dollar, further confounding policy makers who are seeking to spur growth and inflation in the world’s third-largest economy. As the currency surged Tuesday, Japanese Vice Finance Minister Masatsugu Asakawa said he’s watching with concern to see if there are speculative moves in the foreign-exchange market.

“Considering how much the yen has strengthened, Japanese shares are showing resilience,” said Chihiro Ohta, a senior strategist with SMBC Nikko Securities Inc. “However, there aren’t any reasons to actively buy Japanese stocks right now.”

The Shenzhen Composite Index added 0.3 percent after a long-anticipated exchange trading link between Hong Kong and Shenzhen was unveiled. The Shanghai Composite Index finished little changed.

China’s regulators took another step toward opening their financial markets on Tuesday, unveiling a second channel for foreign investors to buy the country’s stocks while also lifting restrictions on asset flows. The trading link between Hong Kong and Shenzhen is expected to start in about four months.

Second Link

The long-delayed link, which had been expected for more than a year, is part of China’s efforts to internationalize its capital markets and increase its global influence to something more in line with the heft of the nation’s economy. Barriers to foreigners wanting to trade the $6.5 trillion of mainland equities were one of the reasons that MSCI Inc. decided not to include the shares in its global benchmark indexes in June. Authorities in Beijing have also kept tight control over how much money leaves the country.

Orion Corp. sank 13 percent, the most since April 2002, as the South Korean candy maker reported operating profit that missed analyst estimates. Singapore Telecommunications Ltd. fell 1.4 percent after Fitch Ratings said the credit rating for Southeast Asia’s biggest phone company is at risk of being downgraded if it buys a stake in Thailand’s Intouch Holdings Pcl from parent Temasek Holdings Pte. Sumitomo Heavy Industries Ltd. added 8.2 percent in Tokyo after broker Nomura Holdings Inc. raised its rating on the stock to buy.

Futures on the S&P 500 Index dropped 0.1 percent. The U.S. equity benchmark index slipped 0.6 percent on Tuesday.

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