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Markets

Asian stocks fall amid uncertainty over future Fed rate cuts

BYD, Henderson Land, China Telecom decline

HONG KONG (Nikkei Markets) -- Asian shares outside of Japan declined Thursday, weighed by a pullback in Chinese companies and uncertainty over the extent of future rate cuts by the U.S. Federal Reserve.

The Nikkei Asia300 Index fell 0.8% to close at 1,226. Chinese electric carmaker BYD tumbled 6.6%. While the company's more than 200% year-on-year jump in first-half net profit was in-line with expectations, Morgan Stanley maintained its 'underweight' rating on the stock, citing a gloomy outlook. Chinese personal hygiene products maker Hengan International Group declined 5.3% amid a 3.5% fall in first-half net profit. An index of Chinese companies listed in Hong Kong closed 0.5% lower to end a six-day winning run.

Asian equities' losses came after the Fed minutes reinforced that last month's quarter percentage rate cut was not the beginning of a monetary easing cycle. Similar to what Fed Chair Jerome Powell had said after the July decision, the minutes termed the rate cut a "mid-cycle adjustment" and revealed that officials favored an approach that avoids the appearance of a preset course.

Jingyi Pan, a market strategist at IG Asia, noted that Powell's terming of the rate cut as a mid-cycle adjustment in July had "ignited hawkish perceptions" and the Fed minutes confirmed those views.

The minutes further revealed that there were significant differences among policymakers over the monetary stance. Two Fed members wanted to cut rates by 50 basis points, while two wanted no reduction at all.

Attention now turns to Powell's speech at Jackson Hole on Friday. A few analysts reckon that Powell may change his tone and take a more dovish stance in light of the increase in uncertainty over U.S.-China trade since the July meeting.

In other movers on the A300 on Thursday, Henderson Land Development fell 3.2% after the Hong Kong real estate developer's first-half net profit halved from a year ago. The decline was due to lower revenue and absence of profit contribution from the disposal of an entire residential development project.

Pan-Asia insurer AIA Group declined 1.6%. The company is scheduled to report earnings for the January-to-June period on Friday.

Cathay Pacific Airways edged 0.2% lower. July combined passenger traffic of the airline and its regional unit Cathay Dragon grew 4% on-year to 3.28 million. The passenger load factor decreased 0.6% to 86.1%.

BOE Technology Group advanced 2.8%. Apple is in the final stages of certifying advanced screens from the Chinese display maker for its iPhones next year, part of the U.S. technology giant's attempts to cut costs and reduce its reliance on South Korea's Samsung Electronics, Nikkei Asian Review reported. Shares of Samsung Electronics closed 1% lower.

China Telecom declined 1.4%. The company posted a 2.5% rise in profit for the first half, helped by cost controls that made up for the falling revenue from tariff cuts and rising competition.

China Overseas Land & Investment lost 2.1%. The property major posted a 7.4% increase in first half net profit, aided by higher property sales.

Meanwhile, Indonesia's central bank earlier Thursday surprised economists by cutting the key policy rate by a quarter percentage points to support economic growth. Only two of the 19 economists polled by Reuters had expected the central bank to ease the rate.

--Nimesh Vora

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