Wednesday, 21 August 2013

Asian Stocks Drop as Fed Minutes Signal Tapering Support

By Kana Nishizawa - Aug 21, 2013 10:22 PM PT
Asian stocks fell, with the regional gauge close to wiping out all this year’s gains, as it heads for its longest losing streak since November, after Federal Reserve minutes showed officials support stimulus cuts this year.
Mazda Motor Corp. (7261), a Japanese carmaker that gets 30 percent of its revenue in North America, slumped 2.8 percent. Aboitiz Equity Ventures Inc., which has investments in power and banks, tumbled 8.3 percent in Manila as the nation’s stock market resumed trading after a three-day closure. Brambles Ltd. (BXB), an Australian container maker, slid 5.2 percent after its profit missed estimates. China Shenhua Energy Co., the nation’s top coal miner by market value, rose 1.7 percent in Hong Kong after Chinese manufacturing unexpectedly expanded.
Aug. 22 (Bloomberg) -- Peter Wilmshurst, executive vice president and portfolio manager at Franklin Templeton Investments, talks about the impact of Federal Reserve monetary policy on global stock markets, and his investment strategy. He speaks with Zeb Eckert on Bloomberg Television's "First Up." (Source: Bloomberg)
The MSCI Asia Pacific Index dropped 0.9 percent to 129.45 as of 2:20 p.m. in Tokyo, less than 0.1 percent away from wiping out this year’s gains. About two stocks declined for each that rose as all 10 industry groups fell on the measure.
“It seems there’s obviously unanimous, broader support for tapering and it seems the prospect of tapering sooner rather than later is a good excuse for markets to have a correction,”Don Williams, chief investment officer at Platypus Asset Management Ltd. in Sydney, which manages about $1.2 billion, said by telephone. “The market is correcting and that might continue for some time.”

Fed Minutes

Minutes released yesterday from the Federal Open Market Committee’s July meeting showed officials were “broadly comfortable” with Chairman Ben S. Bernanke’s plan to start reducing bond buying this year if the economy improves, with a few saying tapering might be needed soon.
The Asia-Pacific index has wiped out all this year’s gains, lagging a 15 percent surge in the S&P 500 as growth slows in China and speculation that the Fed will curb stimulus spurred investors to sell assets across Asia and emerging markets.
Japan’s Topix (TPX) added 0.1 percent. South Korea’s Kospi index dropped 0.9 percent, with volume 31 percent above its 30-day intraday average, while Australia’s S&P/ASX 200 Index declined 0.5 percent. New Zealand’s NZX 50 Index lost 0.5 percent.
Hong Kong’s Hang Seng Index declined 0.6 percent and China’s Shanghai Composite Index was little changed. Taiwan’s Taiex dropped 0.3 percent and Singapore’s Straits Times Index fell 1.2 percent.
The MSCI Asia Pacific gauge traded at 12.7 times estimated earnings yesterday compared with 14.9 for the S&P 500 and 13.7 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

September Paring

U.S. policy makers will probably pare their $85 billion in monthly bond purchases at the FOMC’s Sept. 17-18 meeting, according to 65 percent of 48 economists surveyed this month by Bloomberg.
At the conclusion of its two-day meeting in July, the Fed said that while economic growth should pick up from its recent pace, persistently low inflation could hamper the recovery. Policy makers repeated a pledge to hold the target interest rate near zero as long as the jobless rate remains above 6.5 percent and the outlook for inflation over one to two years doesn’t exceed 2.5 percent.
Futures on the Standard & Poor’s 500 Index lost 0.1 percent today. The S&P 500 fell 0.6 percent in New York yesterday to close at lowest level since July 8.

Mazda, Sony

Mazda slid 2.8 percent to 388 yen in Tokyo, while Sony Corp., an electronics maker that gets about two-thirds of sales overseas, declined 1.7 percent to 1,905 yen. James Hardie Industries SE, a building-materials supplier that counts the U.S. as its biggest market, retreated 2.3 percent to A$9.67 in Sydney.
Tokyo Electric Power Co. (9501), the operator of the Fukushima nuclear facility, slumped 2.7 percent to 542 yen, extending losses this week after Japan’s Nuclear Regulation Authority yesterday said a radioactive water leak at its stricken plant is a “serious incident” rated three on the seven-level International Nuclear and Radiological Event Scale. The company said it needs overseas expertise to contain the disaster.
Brambles slumped 5.2 percent to A$8.70 in Sydney after the company said its profit for the year ended June 30 was A$640.6 million ($573 million), missing analyst estimates.
Atlas Iron Ltd. (AGO), an iron-ore producer, tumbled 7.5 percent to 86 Australian cents after its full-year underlying income of A$13.7 million missed analyst estimates.

Miners Fall

BHP Billiton Ltd. (BHP), the world’s biggest mining company, sank 1 percent to A$35.39 in Sydney, extending its steepest two-day decline since June. Rio Tinto Group, the second-largest miner, retreated 0.8 percent to A$59.13 after the London Metal Exchange Index dropped 1.2 percent yesterday.
Aboitiz Equity Ventures tumbled 8.3 percent to 44 pesos in Manila, the seventh-steepest drop on the MSCI Asia Pacific Index. The Philippine Stock Exchange Index (PCOMP) tumbled 6.1 percent, the worst-performing among major emerging market indexes. The country’s stock exchange has been closed and trading of currencies and government bonds was halted this week because of floods in Manila and a public holiday yesterday.
A Chinese manufacturing index rose in August from an 11-month low, adding to signs the world’s second-biggest economy is stabilizing. The preliminary reading of 50.1 for a Purchasing Managers’ Index released today by HSBC Holdings Plc and Markit Economics compares with a final figure of 47.7 in July and the 48.2 median estimate in a Bloomberg News survey of 16 economists. A number above 50 indicates expansion.

Energy Stocks

China Shenhua Energy gained 1.7 percent to HK$24 in Hong Kong, while China Coal Energy Co., the country’s second-largest producer of the fuel, advanced 2.4 percent to HK$4.79.
Among other stocks that rose, Toyo Suisan Kaisha Ltd. (2875), an instant noodle maker, gained 3.7 percent to 3,090 yen in Tokyo after SMBC Nikko raised its rating to outperform from underperform.
Origin Energy Ltd. (ORG), Australia’s largest electricity retailer, jumped 6.6 percent to A$13.08 in Sydney after obtaining A$7.4 billion in bank loans to refinance debt and bolster funding after a liquefied natural gas project begins.
Emerging market stocks were roiled this week amid concern capital outflows will accelerate. Nations from Brazil to Indonesia have raised borrowing costs in 2013 to try to aid their currencies as the prospect of reduced U.S. monetary stimulus curbs demand for assets in developing nations. Indonesia’s Jakarta Composite Index fell 2.3 percent today, takings its loss this week to almost 10 percent.
To contact the reporter on this story: Kana Nishizawa in Tokyo at
To contact the editor responsible for this story: Sarah McDonald at