Asian stocks fell, dragging down the MSCI Asia Pacific Index by the most in two weeks, as Chinese companies declined on concern the government will seek to cool asset inflation, overshadowing gains by Japanese banks. Bank of Communications Co. dropped 3 percent in Hong Kong after a person with direct knowledge of the situation said China ordered the bank and some other lenders to increase their reserve ratios. Agile Property Holdings Ltd. plunged 8.7 percent after a report showed China’s home prices rose last month. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank by market value, jumped 4.2 percent after the Financial Times said Group of 20 leaders meeting this week may seek to exempt large Asian banks from stricter global rules. The MSCI Asia Pacific Index fell 0.6 percent to 134.44 as of 1:43 p.m., with about as many stocks declining as advancing. The gauge was on course for its biggest drop since Oct. 27. “There is no doubt that China is on its way to further tightening,” said Danny Yan, a Hong Kong-based fund manager at Taifook Asset Management, which oversees about $400 million. “Food inflation in China is getting out of control. The whole world is flooded with capital that has nowhere to go. Capital inflows are a serious problem facing China. To tackle the problem, tightening liquidity control seems unavoidable.” Hong Kong’s Hang Seng Index lost 1.1 percent and China’s Shanghai Composite Index declined 1.1 percent. Australia’s S&P/ASX 200 Index slipped 0.9 percent and South Korea’s Kospi Index climbed 0.2 percent. Japan’s Nikkei 225 Stock Average gained 1 percent, the gauge’s biggest advance since June. China Banks, Property Futures on the Standard & Poor’s 500 Index fell 0.2 percent. The index slid 0.8 percent yesterday, the most in three weeks, as financial and raw-materials companies declined. Bank of Communications sank 3 percent to HK$8.69, and Bank of China Ltd. lost 3.1 percent to HK$4.63. China ordered some lenders to increase their reserve ratios by 50 basis points from Nov. 15, the person with direct knowledge of the situation. A press official at the People’s Bank of China declined to comment. Agile Property, which receives all its revenue from China, sank 8.7 percent to HK$11.56, the index’s steepest drop. China Resources Land Ltd., a state-controlled developer, dropped 3.7 percent. Home prices in 70 Chinese cities climbed 8.6 percent from a year earlier, China Information News, the statistics bureau’s newspaper, reported today. ‘Further Measures’ Government data due for release in China tomorrow will show the inflation rate accelerated to 4 percent in October, according to the median estimate of 28 economists surveyed by Bloomberg. That would be the fastest pace in two years. The government’s full-year inflation target is 3 percent. “Inflationary expectations are high and the market is anticipating further measures by the government to damp price increases,” said Wang Hui, a Changsha, China-based strategist at Founder Securities Co. The MSCI Asia Pacific Index rose 3.3 percent through yesterday since the U.S. Federal Reserve unveiled on Nov. 3 plans to buy an additional $600 billion of Treasuries to bolster economic growth. Stocks in the gauge trade at 14.7 times estimated earnings on average, compared with about 22.7 times at the start of the year, according to data compiled by Bloomberg. Mitsubishi UFJ, which gets all its revenue in Japan, rose 4.2 percent to 393 yen. Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest bank by market value, gained 4.7 percent to 2,485 yen. Mizuho Financial Group Inc., the No. 3, jumped 6.8 percent to 126 yen, the biggest advance on the Nikkei 225. Japan’s top-three banks were the biggest supports to the MSCI Asia Pacific Index. They may be exempted from plans to subject major global banks to stricter regulations and capital requirements, since most or all of their assets are domestic, the Financial Times said today, citing legal experts and people briefed on the agenda for this week’s meeting of the G-20. “If the report is true, concern that banks need to raise capital will ease,” said Masayoshi Yano, a senior market analyst at Tokyo-based Meiwa Securities Co. To contact the reporters for this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Hanny Wan in Hong Kong at hwan3@bloomberg.net.

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