ASIA MARKETS: Asia Stocks Drop As Fed Stays On Taper Track

By V. Phani Kumar, MarketWatch

HONG KONG (MarketWatch) -- Asian stocks dropped Thursday after the Federal Reserve indicated it remained on course to reduce the size of its monetary stimulus by the end of the year, with the region's exporters and resource shares leading the decline.

Japan's Nikkei Stock Average fell 1.1%, South Korea's Kospi lost 1.5%, and Australia's S&P/ASX 200 gave up 1.2%, with investors also looking ahead to a preliminary reading on manufacturing activity in China -- a key trading partner for the entire region.

The losses tracked a lower finish on Wall Street Wednesday, after minutes of the Fed's July meeting showed officials agreed the U.S. economy will pick up later this year, allowing the central bank to taper its $85 billion-a-month in bond purchases before the end of the year.

The officials didn't say exactly when they would reduce the size of the Fed's stimulus -- a key tailwind for global markets -- and market participants differed in their opinions.

Economists at Barclays said the minutes didn't change their view that the central bank would taper bond purchases at its September meeting.

IHS Global Insight financial economics director Paul Edelstein expects the Fed to decide in favor of tapering the purchases at its December meeting and gradually wind down the asset buying further through the first half of 2014.

Some others saw the Fed minutes as signaling a wait-and-see approach.

"The Fed certainly seems to have mastered the art of keeping the market guessing. ... The only way forward is to continue closely watching U.S. economic data for clues on how soon we can expect tapering to start," said IG Markets strategist Stan Shamu.

Exporters and resources were among the sectors on the retreat Thursdayin Asia, amid concerns the Fed's reduced stimulus would lower demand for exports from the region and could affect investment inflows into emerging markets.

Among mining and metals shares, BHP Billiton Ltd. (BHP) gave up 1.9%, and gold extractor Newcrest Mining Ltd. (NCMGF) fell 3% in Sydney, while Pacific Metals Co. (PFMTF) lost 3.1% in Tokyo, and steel maker Posco (PKX) dropped 1.9% in Seoul.

Several technology and automobile exporters also lost ground, with Isuzu Motors Ltd. (ISUZY) falling 2.7%, and Sony Corp. (SNE) shedding 1.8% in Tokyo, while LG Display Co. (LPL) gave up 1.9% in Seoul.

Some insurance stocks provided support to the Japanese market after recent losses. T&D Holdings Inc. (8795.TO) rose 3.1%, and Dai-Ichi Life Insurance Co. (DCNSF) gained 1.2%.

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