Asian Stocks Extend Losing Streak to Sixth Day as Japan Falls

(Bloomberg) -- Asian stocks fell for a sixth day, the longest losing streak since May, amid an uncertain outlook for global central bank stimulus. Japanese banks sank on concern the country will deepen its negative interest rate policy.

The MSCI Asia Pacific Index lost 0.4 percent to 136.08 as of 5:15 p.m. in Tokyo. The gauge is trading at the lowest level in five weeks after valuations this month reached the highest in more than a year and investors placed a higher probability of less monetary stimulus globally. That’s triggered a surge in volatility in the past week in equity markets from Hong Kong to New York. Japan’s Topix index dropped on bets the central bank will delve deeper into negative interest rates at its meeting next week, hurting earnings prospects at the country’s biggest lenders.

“The markets are under pressure,” James Audiss, Sydney-based senior wealth manager at Shaw and Partners Ltd., which oversees about $7.5 billion, said by phone. “Volatility is here to stay going into the back-end of the year with central bank meetings and the U.S. election coming up.”

The Asian benchmark equity measure’s 4.2 percent slide from this year’s peak on Sept. 7 comes as investors speculate on what’s in store at next week’s policy meetings at the Federal Reserve and the Bank of Japan. Morgan Stanley said it now expects the BOJ to go further into negative interest rates and increase its asset purchases marginally.

In the U.S., conflicting messages over policy from Fed officials have perplexed the market, with bets on an interest-rate hike next week down two percentage points from a week ago to 20 percent. Fed board member Lael Brainard said earlier this week that she sees no reason to rush to raise rates. Boston Fed President Eric Rosengren said last week the U.S. economy could overheat if the central bank waited too long to boost borrowing costs.

Japan’s Topix index fell 1 percent, with the Nikkei Stock Average Volatility Index surging 6.3 percent. The yen fluctuated after some central-bank officials told Bloomberg News that they still favor stepping up purchases of government bonds if the board decides it needs to expand stimulus, suggesting that cutting a key interest rate deeper into negative territory, or expanding purchases of risk assets such as real-estate investment trusts, aren’t the only options.

Property Downgrade

Lawson Inc. jumped 7 percent, the biggest gain since March 2011. Mitsubishi Corp., the largest shareholder, is considering increasing its stake in the convenience store operator to make it a subsidiary. Real-estate firms declined in Tokyo after Jefferies Group LLC cut its rating on the sector to underweight. Sumitomo Realty & Development Co. dropped 5 percent.

Singapore’s Straits Times Index fell 0.3 percent, the FTSE Bursa Malaysia KLCI Index dropped 0.4 percent and New Zealand’s S&P/NZX 50 Index lost 0.2 percent. 

Australia’s S&P/ASX 200 Index added 0.2 percent as banks climbed. Commonwealth Bank of Australia, the nation’s largest, rose 1.9 percent as analysts at Goldman Sachs Group Inc. and Macquarie Group Ltd. upgraded recommendations on the shares.

Stock markets in China, Taiwan and South Korea are closed Thursday for holidays. Equity indexes in Indonesia and the Philippines jumped 2.2 percent each, both rebounding from recent declines.

The Hang Seng Index and the Hang Seng China Enterprises Index added 0.6 percent each. Hong Kong’s markets will be closed on Friday. Contracts on the S&P 500 advanced 0.1 percent after a rally in the underlying gauge fizzled in afternoon trading Wednesday to close down 0.1 percent.

“With investors trying to first gauge U.S. and Japanese monetary policy, purchases are being held back,” said Mitsushige Akino, an executive officer at Ichiyoshi Asset Management Co. “We’re in a pattern where even marginal selling can easily spark declines.”

--With assistance from Yuko Takeo and Hiroyuki Sekine To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net. To contact the editors responsible for this story: Jeff Sutherland at jsutherlan13@bloomberg.net, Chan Tien Hin, Andrew Janes