Asian Shares Down; Japan Bucks Trend

By DANIEL INMAN

Asian markets were mostly lower Thursday, with the Australian market touching a seven-week low, while Japanese stocks jumped higher as the yen hit its lowest level in more than six months.

Worries over the coming fiscal cliff in the U.S. continued to weigh on sentiment following comments from U.S. President Barack Obama Wednesday, who said that unless politicians can find a compromise, the resulting tax hikes and spending cuts could send the world's largest economy into a recession.

The U.S. wasn't the only source of downbeat news. Industrial production in Europe marked its largest decline in over three-years, while geopolitical tensions in the Middle East increased after Israel assassinated a senior Hamas commander.

In currency markets, the U.S. dollar continued to climb against the yen, to ?80.81 late in the Asian day compared with ?80.24 late Wednesday in New York, adding to an overnight 1.1% rise.

The yen hit a six-and-a-half-month low versus the dollar on Thursday amid expectations the Bank of Japan will take aggressive easing steps under a new government, after Prime Minister Yoshihiko Noda pledged Wednesday to dissolve parliament and call a snap election next month.

The Liberal Democratic Party, currently in opposition, is expected to win and its stance of printing money to help the economy could weaken the yen more against the dollar.

"Shinzo Abe, the head of the likely election winner, the Liberal Democratic Party, has said he would change the law so the central bank's board must bend to his will or face the sack," said Nicholas Smith, CLSA Japan strategist in Tokyo. "The market is salivating over the free money that implies."

Japanese stocks responded well to the weaker yen bucking broader regional weakness, with the Nikkei Stock Average rising 1.9% to 8829.72, its first gain after eight sessions of closing flat or lower. Large exporters benefited from the softer currency: Mazda Motor added 5.6% and construction equipment manufacturer Komatsu was 4.6% higher.

Sony Corp. sank 8.9% in Tokyo following an announcement that it will issue Y150 billion in convertible bonds to raise money for strategic investment and to repay loans.

The main event in Asia on Thursday was in Beijing, where China presented its next generation of senior leaders. As expected, Xi Jinping took the top job on a seven-member Politburo Standing Committee, China's top decision making body.

"The major good thing about (the change in leadership) is that it takes away at least one of the major uncertainties about China," said David Chang, regional head (Greater China) at Franklin Templeton Investments in Hong Kong.

The Shanghai Composite Index finished 1.1% lower at 2030.29, a seven-week low, tracking weakness in regional markets and on disappointment over the lack of perceived strong reformist elements in the country's newly unveiled top leadership.

The absence of Li Yuanchao, the head of the Party's Organization Department, and Wang Yang, the Party chief of Guangdong province from the powerful Politburo's Standing Committee dented hopes that Beijing would push ahead with more aggressive political and economic reforms in the coming years.

Hong Kong's Hang Seng Index was caught up in the regional declines dropping 1.6% to 21108.93.

Chinese Internet company Tencent Holdings dropped 7% in Hong Kong after releasing below-view earnings for the third quarter, while fashion retailer Esprit Holdings rocketed 22% on news that former chairman Michael Ying increased his stake in the company, fueling speculation that he might make a return.

Australia's S&P/ASX 200 was 0.9% lower at 4349.20 after touching a fresh seven-week low of 4339.

Qantas Airways climbed 4.1% on profit guidance and plans for debt reduction and a share buyback, while James Hardie Industries dropped 1.9% on disappointing interim results.

South Korea's Kospi Composite lost 1.2% to 1870.72.

Write to Daniel Inman at daniel.inman@wsj.com

Source: http://online.wsj.com/article/SB10001424127887324556304578119713530248282.html?mod=rss_world_markets

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