Asian stocks fell, with a gauge of Chinese shares in Hong Kong entering a bear market, after the Federal Reserve signaled it may raise U.S. interest rates from the middle of next year.
Newcrest Mining Ltd. (NCM), Australia’s biggest gold producer, slumped 7.9 percent after bullion dropped the most in three months as the Fed’s announcement curbed demand for havens. China Mobile (941) Ltd. dropped 3.6 percent to its lowest price since April 2009 in Hong Kong after the world’s largest phone company posted profit that missed estimates. BYD Co., the electric-car maker backed by Warren Buffett, tumbled 14 percent in Hong Kong after projecting lower-than-expected first-quarter profit.
The MSCI Asia Pacific Index sank 2.1 percent to 131.86 at 7:24 p.m. in Hong Kong, its lowest close since Feb. 6. More than five shares fell for every one that rose on the gauge. The Fed yesterday said its key rate, currently near zero, would be 1 percent by the end of 2015 and 2.25 percent a year later.
“We’re going to see more follow-through selling in Asia,” Toby Lawson, head of futures, options and cash equities trading for Asia Pacific at Newedge Group SA in Sydney, said by phone. “It’s significant that the Fed fund rate will rise to 1 percent by the end of 2015. We could see capital outflows from emerging markets back into the U.S., especially given residual concerns about China’s economy slowing.”
The Hang Seng China Enterprises Index (HSCEI) of mainland stocks traded in Hong Kong dropped 1.7 percent, bringing losses from its Dec. 2 high past the 20 percent threshold that some investors consider a bear market as the yuan sank to a one-year low amid deepening concern the world’s second-largest economy is slowing. The city’s benchmark Hang Seng Index declined 1.8 percent.
The Shanghai Composite Index fell 1.4 percent to its lowest since Jan. 20 as Goldman Sachs Group Inc. cut the growth outlook for China. The government will accelerate measures to stabilize growth and allow property companies to raise money through share sales for the first time since 2010 after a closely held developer collapsed this week.
Japan’s Topix index dropped 1.6 percent after rising by as much as 0.6 percent. South Korea’s Kospi index decreased 0.9 percent. Australia’s S&P/ASX 200 Index declined 1.2 percent. Singapore’s Straits Times Index slipped 0.8 percent, while Taiwan’s Taiex index slid 1.1 percent. New Zealand’s NZX 50 Index added 0.1 percent.
Futures on the S&P 500 slipped 0.2 percent today after the U.S. benchmark index fell 0.6 percent yesterday. The central bank’s bond-buying program, which was reduced by another $10 billion to a $55 billion monthly rate, will be wound down by year-end with a rate increase to follow within six months, Chair Janet Yellen indicated.
Yellen said the quantitative-easing program used to stimulate the U.S. economy would end this fall should the central bank continue to taper in measured steps. There will be “considerable time” between the end of the stimulus and the first rate increase, meaning “six months or that type of thing,” she said.
Most Federal Open Market Committee participants reiterated their view that rates will be held at current levels until 2015. The median forecast for rates among 16 Fed officials rose from December, when they estimated the rate at the end of next year at 0.75 percent, and 1.75 percent for the end of 2016. Officials said they will look at a wide range of data in determining when to boost borrowing costs, dropping a pledge tying interest rates to a 6.5 percent unemployment rate.
“The FOMC was more hawkish,” said Anthony Valeri, a market strategist with LPL Financial Corp. in San Diego, which oversees $350 billion. “The expectation for higher rates got pushed forward and the bond market was not priced for that.”
The U.S. and Europe are moving to increase sanctions on Russia after President Vladimir Putin signed an accord setting in motion Crimea’s accession to Russian territory. With visa bans and asset freezes on Russian officials failing to sway Putin, European Union leaders meet today to consider their next move.
Ukraine ordered the removal of its military from the majority Russian-speaking Crimea and said it will strengthen its deployments on the country’s border with Russia.
Newcrest sank 7.9 percent to A$10.61. Zijin Mining Group Co., China’s largest gold producer, slipped 2.4 percent to HK$1.60 in Hong Kong.
China Mobile fell 3.6 percent to HK$67. Net income retreated 16 percent to 30.2 billion yuan ($4.8 billion) in the fourth quarter, according to figures derived from full-year results released by the Beijing-based company today. That missed the 33.4 billion-yuan average of three analyst estimates compiled by Bloomberg.
Myer Holdings Ltd. slid 5.3 percent to A$2.52 in Sydney, its biggest decline since May. The department-store operator said its second-half gross operating-profit margin will be flat compared to a year earlier. The company had forecast an improvement in September.
BYD tumbled 14 percent to HK$47.60 to lead losses on the H-share index. The carmaker projected first-quarter net income of as much as 15 million yuan, which Nomura Holdings Inc. said was lower than expected.
Tencent Holdings Ltd. fell 1.7 percent to HK$558, erasing gains of 1.6 percent. Asia’s biggest Internet company posted fourth-quarter profit that missed analysts’ estimates and proposed a 5-1 share split to boost holdings by individuals.
Among shares that advanced, Country Garden Holdings Co. (2007), a Chinese developer controlled by billionaire Yang Huiyan, jumped 10 percent to HK$3.14, rebounding from yesterday’s 12 percent slump. Goldman Sachs added the company to its conviction buy list.
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