Asia Stocks Drop on China Plenum Disappointment, Fed Bets


Asian stocks fell after China’s leaders failed to outline steps to curb state dominance of the economy and amid bets the Federal Reserve may start reducing U.S. stimulus next month.

Banks slumped in Hong Kong after a communique at the end of China’s four-day plenum made scant mention of financial reforms. Tencent Holdings Ltd., China’s biggest Internet company, fell 2.5 percent after a news report quoted its chairman saying the company’s valuation is “scarily” high. Noble Group Ltd. lost 5.1 percent in Singapore after Asia’s largest commodity trader by sales said profit slumped. Pioneer Corp. surged 21 percent after the Japanese maker of car stereos reported an unexpected first-half operating profit.

The MSCI Asia Pacific Index dropped 0.9 percent to 138.59 as of 1:53 p.m. in Tokyo, heading for its first decline in three days. All 10 industry groups on the measure fell.

“Quite a few people put on their positions ahead of the communique, expecting actionable moves to be made, but that’s not the case,” said Andrew Sullivan, director of sales trading at Kim Eng Securities in Hong Kong. “The market is just disappointed.”

Hong Kong’s Hang Seng Index plunged 1.3 percent as financial shares led declines, with Industrial & Commercial Bank of China Ltd. sinking 2.8 percent ti HK$5.20. China’s Shanghai Composite Index lost 0.8 percent. Japan’s Topix index lost 0.4 percent after a report showed the country’s machinery orders dropped in September.

Regional Gauges

Taiwan’s Taiex Index slid 0.9 percent and Singapore’s Straits Times Index lost 0.4 percent. Australia’s S&P/ASX 200 Index dropped 1.6 percent, while New Zealand’s NZX 50 Index rose 0.1 percent. South Korea’s Kospi index fell 1.3 percent as Samsung Electronics Co., which gets 43 percent of its revenue in America and China, slid 1.8 percent to 1,430,000 won.

China stopped short of unveiling detailed policy shifts after President Xi Jinping oversaw the gathering of Communist Party leaders in Beijing. Instead, they said the role of markets would be elevated in the nation’s economic strategy.

The nation will make markets “decisive” in allocating resources, according to yesterday’s communique from the third full meeting, or plenum, of the party’s 18th Central Committee. At the same time, the state will remain “dominant” in the economy, indicating limits on reducing government involvement.

Investors Disappointed

“It underwhelmed, replete with visions but short on details,” Hao Hong, a Hong Kong-based strategist at Bocom International Holdings Co., said in an e-mail. “Judging from investors’ response, they are disappointed.”

Futures on the S&P 500 lost 0.4 percent today. The measure fell 0.2 percent yesterday as corporate earnings and an improving economy fueled speculation about the Fed’s timetable for reducing stimulus.

Fed Bank of Atlanta President Dennis Lockhart said yesterday a reduction in U.S. bond purchases “could very well take place” next month.

“Tapering is obviously back on the agenda as data in the U.S. continues to be strong,” said Donald Williams, Sydney-based chief investment officer at Platypus Asset Management Ltd., which oversees about A$1.6 billion ($1.5 billion). “Maybe that’s enough for a small correction, but I think with rates at very low levels and likely to remain low, it’s still a good environment for equity markets.”

Fed’s Outlook

Investors will scrutinize U.S. economic reports this week on jobless-benefit claims and manufacturing in the New York area. Economists forecast the central bank will delay tapering asset purchases until its March meeting. Policy makers will probably pare the monthly pace of bond buying to $70 billion from $85 billion at that time, according to the median of 32 estimates in a Bloomberg survey on Nov. 8. The Fed next meets Dec. 17-18.

The Asia-Pacific gauge traded at 13.6 times estimated earnings as of yesterday compared with multiples of 16 for the Standard & Poor’s 500 Index and 15 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Of the companies on the MSCI Asia Pacific Index that have reported quarterly earnings this season and for which Bloomberg compiles estimates, more than 50 percent exceeded analysts’ profit expectations.


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