Asian Stocks Slump as Fed Cuts U.S. Bond Buying, China PMI Falls

Jan 30, 2014 5:54 am ET

Jan. 30 (Bloomberg) -- Asian stocks fell, heading for the largest monthly slide in eight months, after the Federal Reserve pressed on with cuts to U.S. economic stimulus and as a report showed China’s manufacturing industry contracted.

Honda Motor Co., which gets 83 percent of its auto sales abroad, lost 2.5 percent as Japanese exporters retreated after the yen gained from the close of equity markets in Tokyo yesterday. Treasury Wine Estates Ltd. slumped by a record 20 percent in Sydney as the world’s second-largest publicly traded wine maker said earnings fell. Hitachi Metals Ltd. surged 5.1 percent in Tokyo, leading gains on the regional benchmark index, after profit at the steel manufacturer topped analyst estimates.

The MSCI Asia Pacific Index lost 1.5 percent to 134.65 as of 6:48 p.m. in Hong Kong, with all 10 industry groups on the gauge falling. The measure has dropped 4.7 percent in January, on course for the biggest monthly slump since May as part of a global equities rout sparked by weaker-than-expected economic data from China and a sell-off in emerging-market currencies.

“Given the likelihood of continued Fed tapering in the period ahead, there appears little doubt that long emerging market positions are likely to be subjected to near-term pressure,” Matthew Sherwood, Sydney-based head of investment markets research at Perpetual Ltd., which manages about $25 billion, said in an e-mail, referring to bets on gains in developing-nation assets. “What we are seeing at present is a global re-pricing of risk.”

Regional Gauges

Japan’s Topix index slumped 2.6 percent and the Nikkei 225 Stock Average tumbled 2.4 percent. The yen held at 102.47 to the dollar, stronger than the 103.29 level when Tokyo equity markets shut yesterday. The Nikkei 225 is on course for its biggest monthly rout since May 2012. Honda sank 2.5 percent to 3,903 yen.

Australia’s S&P/ASX 200 Index declined 0.8 percent and New Zealand’s NZX 50 Index slid 0.7 percent. Hong Kong’s Hang Seng Index fell 0.5 percent while the Hang Seng China Enterprises Index of mainland Chinese stocks listed in the city slid 0.8 percent. China’s Shanghai Composite Index lost 0.8 percent, while Singapore’s Straits Times Index dropped 0.7 percent.

Markets in South Korea and Taiwan are closed today and Hong Kong and Singapore shut early for the Chinese New Year holidays.

The Fed cut the pace of monthly bond buying for a second straight meeting, saying it will reduce purchases by another $10 billion to $65 billion, sticking to a plan for a gradual withdrawal from its unprecedented monetary easing. The central bank left unchanged its statement that it will probably hold its target interest rate near zero “well past the time” that the unemployment rate falls below 6.5 percent.

China Manufacturing

The final reading on HSBC Holdings Plc and Markit Economics Ltd.’s January purchasing managers’ index for Chinese manufacturing was 49.5, the first contraction in six months. Readings below 50 indicate contraction.

Of the 109 companies on the MSCI Asia Pacific Index that have reported earnings since the beginning of January and for which estimates are available, 54 percent missed analyst estimates for profit, according to data compiled by Bloomberg. More than 100 firms on the gauge will announce results this week.

Hitachi Metals gained 5.1 percent to 1,600 yen after reporting third-quarter operating profit of 18 billion yen, more than the 16 billion yen forecast of three analysts surveyed by Bloomberg.

Relative Value

The MSCI Asia Pacific index traded at 12.7 times estimated earnings compared with a multiple of 15.1 for the Standard & Poor’s 500 Index and 13.6 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

U.S. stocks sank yesterday as earnings forecasts from Yahoo! Inc. and AT&T Inc. disappointed investors. Yahoo slumped 8.7 percent as its sales outlook signaled slowing growth for the Internet company. Boeing Co. retreated 5.3 percent and AT&T lost 1.2 percent after forecasts trailed some analysts’ estimates. The S&P 500 sank 1 percent for its lowest close since Nov. 12. Futures on the measure gained 0.2 percent today.

Treasury Wine Estates slumped 20 percent to A$3.64. The parent company of the maker of Penfolds Grange said first-half earnings fell as government austerity measures in China curbed demand for premium wines.

Fortescue Metals Group Ltd. sank 1.3 percent to A$5.23. The iron-ore explorer reported output of the material for the second-quarter that missed analyst estimates.

China Shipping Development Co. dropped 4.7 percent to HK$4.65 in Hong Kong after the crude oil and coal carrier predicted a full-year net loss.

--With assistance from Emma O’Brien in Wellington. Editors: John McCluskey, Sarah McDonald