Asian markets fall on growth fears

Asian stocks fell, led by Japanese equities after Prime Minister Shinzo Abe outlined his economic growth strategy. Shares also dropped on prospects the Federal Reserve will scale back stimulus as the US economy improves.

Japan’s Topix index slid 1.3 per cent, reversing a gain of 1.2 per cent, after Abe’s speech in Tokyo. Westpac Banking Corp., Australia’s No. 2 lender by market value, fell 2.3 per cent, pacing declines among financial shares after the nation’s economy grew less than expected. GCL-Poly Energy Holdings Ltd., the world’s No. 1 maker of polysilicon used in solar panels, rose 6.6 per cent in Hong Kong after the European Union imposed smaller-than-expected tariffs on panels from China.

The MSCI Asia Pacific Index slid 1.5 per cent to 132.74, with more than four stocks falling for each that rose. All 10 industry groups on the gauge dropped. “Shares are being sold because Abe’s plan didn’t have any surprises that meet overblown expectations in the market, while it points in the right direction,” said Takahiro Nakano, a Tokyo-based senior strategist at Mizuho Trust and Banking Co., a unit of Japan’s third-largest bank by market value. “The Fed has started levelling the ground toward scaling back quantitative easing. The market dynamics are changing after rising on monetary policy.”

The MSCI Asia Pacific Index, the benchmark regional equities gauge, gained 4.1 per cent this year through yesterday. That left the gauge yesterday trading at 13.1 times average estimated earnings compared with 14.8 for the Standard and Poor’s 500 Index and 13.2 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

The Topix is down about 14 per cent from an almost five-year high on May 22nd. It is still up about 30 per cent this year on optimism the nation can emerge from 15 years of deflation. Australia’s SandP/ASX 200 Index slumped 1.1 percent as a report showed the economy grew 0.6 per cent last quarter from the previous three months, below the 0.7 per cent median estimate of economists surveyed by Bloomberg.

New Zealand’s NZX 50 Index slipped 0.5 per cent and Singapore’s Straits Times Index fell 1.2 per cent. South Korea’s Kospi index dropped 1.4 per cent and Taiwan’s Taiex Index shed 0.1 per cent. Hong Kong’s Hang Seng Index declined 1.2 per cent and China’s Shanghai Composite Index lost 0.4 per cent.

Japanese stocks fell after Abe pledged a legislative campaign to loosen rules on businesses ranging from non- prescription drugs to construction. Legislation will be enacted as soon as autumn, which means he’s putting off taking on vested interests until after next month’s election for the upper house of parliament. The growth strategy, which is to be detailed next week, is the “third arrow” of Abe’s economic revival plan to accompany fiscal and monetary stimulus. “We’re going to have to reduce our expectations for Abenomics,” said Ayako Sera, a strategist at Sumitomo Mitsui Trust Bank Ltd., which has the equivalent of $325 billion in assets. “The initiatives are too small. The direction is right, but the comments are all long-term. It looks like things are going to move too slowly.”

Bloomberg