Asian Stocks Erase Advance as Chinese Shares Tumble

Asian stocks erased gains and the regional benchmark index retreated from a five-month high after Chinese shares tumbled as the nation's money-market rates surged.

China Resources Land Ltd., the second-largest mainland developer traded in Hong Kong, slipped 2.2 percent. Japan Exchange Group Inc. sank 3.4 percent after the main bourse operator of the world's second-largest equity market didn't boost its full-year profit forecast as analysts had expected. Hyundai Merchant Marine Co. jumped 10 percent after South Korea's biggest shipping line by market value refinanced 280 billion won of debt ($265 million).

The MSCI Asia Pacific Index dropped 0.3 percent to 143.46 as of 2:03 p.m. in Tokyo, erasing gains of as much as 0.5 percent. The gauge had risen for four days and today briefly touched the highest level since June 2008 amid speculation the Federal Reserve will delay tapering economic stimulus. The Shanghai Composite Index (SHCOMP) headed for a three-week low as China's money market rates jumped the most since July.

"The market has had a good run since the U.S. government ended a shutdown last week," Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., said in a telephone interview. "It's not a surprise that we're seeing a bit of a correction. Chinese interest rates are an issue. There's a fear that the mini credit crunch we saw in June could return again. It's probably part of the broader efforts to slow down credit growth in China."

Bank Funding

China's Shanghai Composite Index slipped 1.2 percent, heading for the lowest close since Sept. 30. The seven-day repurchase rate, a gauge of funding availability in the Chinese banking system, surged 42 basis points to 4 percent as of 10:04 a.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. That was the biggest advance since July 29.

The People's Bank of China has suspended selling reverse-repurchase contracts since Oct. 17, leading to a net withdrawal of 44.5 billion yuan ($7.3 billion) from the financial system last week. The authority asked commercial banks to submit orders today for 28-day repurchase contracts, 91-day bills, and 14-day reverse repos planned for tomorrow, according to a trader at a primary dealer required to bid at the auctions.

Hong Kong's Hang Seng Index lost 0.1 percent. Japan's Topix Index (TPX) slid 1 percent, while Taiwan's Taiex index fell 0.4 percent. South Korea's Kospi index dropped 0.7 percent.

Australian Inflation

Australia's S&P/ASX 200 Index declined 0.3 percent, erasing gains of 0.5 percent. The nation's inflation accelerated in the third quarter from the previous three months, a report showed today. New Zealand's NZX 50 Index gained 0.9 percent, extending its advance to a record high.

The MSCI Asia Pacific Index climbed 3.8 percent this month through yesterday after U.S. lawmakers ended the government shutdown and raised the debt ceiling. The gauge yesterday traded at 13.8 times estimated earnings, compared with 15.9 for the Standard & Poor's 500 Index and 14.8 for the Stoxx Europe 600 Index.

The S&P 500 climbed 0.6 percent yesterday, a fourth day of record closing highs, on speculation slower growth in hiring will extend Federal Reserve stimulus. That pushed the U.S. equities benchmark to within a percentage point of the best yearly gain in a decade. Futures on the S&P 500 expiring in December fell 0.3 percent today.

Barclays Plc changed its estimate for the start of Fed tapering to March from December after data showed U.S. employers added 148,000 workers in September, missing the 180,000 increase projected in a Bloomberg survey of economists. The data's release was delayed due to the 16-day U.S. government shutdown.

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Fed policy makers unexpectedly refrained in September from reducing their $85 billion in monthly bond purchases, saying they wanted more evidence of an economic recovery. Deutsche Bank AG expects quantitative easing to continue into the first quarter of next year, while Goldman Sachs Group Inc. economists said that while tapering in December "remains a possibility," March is the most likely date.