Asia Stocks Fall Led by Hong Kong

Asian stocks dropped, led by losses in Hong Kong amid pro-democracy protests in the city. The dollar extended gains and Standard & Poor’s 500 Index futures retreated as U.S. economic data bolstered the outlook for higher interest rates.

The Hang Seng Index lost 1.9 percent by 1:41 p.m. in Tokyo, erasing its gain for the year and dragging the MSCI Asia Pacific Index toward a 0.7 percent decline. The Hong Kong dollar and Chinese yuan weakened as the Bloomberg Dollar Spot Index added 0.1 percent, climbing a seventh day. New Zealand’s currency is poised for its biggest three-day drop in three years. Oil in New York slipped 0.6 percent. S&P 500 futures fell 0.3 percent. Asian bond risk rose to a one-month high.

Hong Kong’s benchmark index tumbled as much as 2.5 percent after police used tear gas to disperse protesters ahead of national holidays this week that will close the city’s markets on Oct. 1 and Oct. 2. The U.S. economy grew at the fastest pace since 2011 in the second quarter, fueling speculation over Federal Reserve rate increases. Pacific Investment Management Co., whose co-founder Bill Gross departed last week, said it sees slower growth in China and downside risks in Australia.

“It’s going to spook some investors who are worried that this could drag out, affecting the business climate in Hong Kong,” Vasu Menon, vice president of wealth management at Oversea-Chinese Banking Corp., said on Bloomberg TV from Singapore. “It’s happening at a time when the U.S. Federal Reserve is talking about tightening monetary policy, a time when China is slowing down.”

Profit Drop

All 50 stocks on the Hang Seng Index fell today, while a gauge of Chinese shares in the city retreated 1.8 percent in a third day of decline. Profits at industrial companies in China declined last month for the first time in two years, data at the weekend showed, as a slowdown in the world’s second-largest economy deepens.

The Shanghai Composite Index pared a gain of as much as 0.7 percent. The Hang Seng China AH Premium index, which measures the weighted-average price difference between dual-listed shares in the mainland versus Hong Kong, rose through the 100 level that shows the gap being erased. Mainland Chinese trading venues close for five days from Wednesday.

The Hong Kong dollar, which is allowed to trade within a tight band versus the U.S. currency, slipped for a sixth day and is at its weakest level since March. The city’s one-year interest-rate swap rose three basis points, the most in 15 months, to 0.485 percent.

Source: bloomberg.com