ASIA MARKETS: China Stocks Fall, Japan Jumps, Ahead Of Fed Meet

By V. Phani Kumar, MarketWatch

HONG KONG (MarketWatch) -- Chinese and South Korean stocks fell Wednesday on caution ahead of the Federal Reserve's monetary-policy decision later in the day, while Japanese shares rallied on a weakened yen and strong overnight gains on Wall Street.

The Nikkei Stock Average outperformed regional markets by a wide margin, finishing the morning trading session 1.3% higher at 13,169.97.

The Tokyo benchmark, which traded more than 2% up earlier in the day, surrendered some gains as the U.S. dollar (USDJPY) pared its initial advances against the Japanese yen in choppy trading action.

Australia's S&P/ASX 200 gained 0.4%, and Taiwan's Taiex added 0.2%.

Their performance followed another triple-digit-point gain for the Dow Jones Industrial Average (DJI) Tuesday, as the Federal Open Market Committee began its two-day policy meeting.

On the downside, the Shanghai Composite fell 1.5%, Hong Kong's Hang Seng Index dropped 0.8%, and South Korea's Kospi also eased 0.8%.

Traders said the FOMC decision and Fed Chairman Ben Bernanke's press conference later Wednesday will likely remove a key source of uncertainty that has affected markets of late in terms of how long the central bank will maintain its $85 billion a month in bond purchases.

"So, if investors get a completely clear picture of where the FOMC is heading, bargain-hunting is on," said IG Markets strategist Evan Lucas.

However, "if the Fed should surprise the market with tapering talk, all bets are off," he said.

Some other analysts said that even if the Fed doesn't immediately signal its intention to downsize its quantitative-easing program -- a key tailwind behind global equity markets for several quarters -- concerns that it will eventually do so may still have an impact.

"Although we don't expect the Fed to decide to scale back its asset purchases today, we do think the prospect of an eventual tapering will continue to dampen capital inflows into emerging-market equities in particular, as it undermines investors' appetite for risk," John Higgins at Capital Economics wrote to clients.

Stock movers

In Japan, shipping stocks posted hefty gains, with utilities, steel makers and financials also making strong advances.

Shares of Kawasaki Kisen Kaisha Ltd. (KWHIY) soared 9%, JFE Holdings Inc. (5411.TO) climbed 4.5%, and Sumitomo Mitsui Financial Group Inc. (SMFJY) added 4.1%.

Camera manufacturers rose in the wake of a Nikkei newspaper report that the top eight digital-camera makers are poised to get on the path to recovery, with majors Canon Inc. and Nikon Corp. anticipating strong profit growth.

Canon (CAJ) climbed 1.7%, and Nikon (NINOY) gained 1.5%.

In Sydney, shares of News Corp. (NWSA) tumbled 8.5% as the stock traded following the spin-off of the media group's publishing assets. The company has retained the group's entertainment assets.

Meanwhile, the voting shares of New Newscorp Inc. -- the company which holds the group's publishing assets, including MarketWatch, the publisher of this report -- was down 45 Australian cents at A$14.55 ($13.82) in heavy volumes as it began trading for the first time.

Losses were spread across sectors in Hong Kong, with shares of China Coal Energy Co. (CCOZY) falling 3%, China Construction Corp. (CICHY) dropping 1.6%, and telecom China Unicom Hong Kong Ltd. (CHU) shedding 2.3%.

Shares of heavyweight HSBC Holdings PLC (HBC) slipped 0.6% after the Hong Kong Monetary Authority Tuesday said it was investigating HSBC and other banks over the possible rigging of local benchmark interest rates.

Financial stocks were mostly lower in Shanghai, meanwhile. Shares of China Citic Bank Corp. (CHCJY) dropped 2%, China Life Insurance Co. (LFC) fell 1.5%, and Citic Securities Co. (CIIHF) retreated 1.6%.

Gold miners fell across the region after the precious metal's futures suffered a sharp price decline in the U.S. amid uncertainty related to the Fed's monetary stimulus.

Newcrest Mining Ltd. (NCMGY) shed 0.5% in Sydney, Zhaojin Mining Industry Co. (1818.HK) fell 2.9% in Hong Kong, and Zijin Mining Group Co. (601899.SH) lost 2.4% in Shanghai.

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