-- Nikkei up 0.3%, Hang Seng Index drops 0.4%, S&P ASX 200 down 0.3%
-- Singapore dollar hits fresh two-month high
(Rephrases lead, updates prices, adds quote, company info)
By Daniel Inman
Asian stocks fell on Wednesday, as a gloomy outlook by U.S. Federal Reserve Chairman Ben Bernanke trumped hopes for further monetary stimulus.
During his testimony to Congress, Mr. Bernanke gave a bleak assessment of the world's largest economy, though he failed to point towards any near term monetary stimulus.
His comments were eventually taken as a positive in the U.S., where the Dow Jones Industrial Average finished up 0.6% overnight, as investors interpreted Mr. Bernanke's remarks as leaving the door open for further policy action. By the time Asia woke up however, the focus was more on poor economic outlook.
The motives of central banks were also under scrutiny in Japan, where the central bank released minutes for its June policy meeting Wednesday morning. Some board members at the meeting said that the central bank should not dismiss any policy options.
Japan's Nikkei was one of the only regional markets to stay in positive territory on Wednesday, up 0.3%, helped by a slight weakening in the local currency, providing a boost to exporters. At Y79.08, the dollar maintained its position above the Y79 level that it has traded above for most of the last month, recovering from a four-week low it hit earlier in the week.
In China, the state-run China Securities Journal published a front-page commentary saying that China should shift its monetary stance towards easing to stop the slowdown in economic growth.
Some observers are expecting an imminent reduction in China's reserve requirement ratio, the minimum of amount of capital that banks have to keep in reserves. Alvin Cheung, associate director at Prudential Brokerage, said that investors were expecting a cut "perhaps as soon as Friday."
Hong Kong's Hang Seng Index dropped 0.4%, giving back some of its surprise 1.3% gain on Tuesday, as the index was pulled down by its single largest constituent, HSBC. The company fell 2%, the worst performer on the index, after the top executive in charge of the bank's anti-money laundering programs stepped down in the wake of a Senate investigation into risky practices.
In Australia, the S&P ASX 200 was 0.3% lower due to a decline in mining stocks. Mining giant BHP Billiton was in the spotlight, falling 1.6%, despite announcing better-than-expected iron output in its fourth quarter production numbers. Fortescue Metals Group sank 3.1%, extending losses, as market analysts cut their forecasts on the iron ore miner due to concerns about potential capital expenditure overrun.
South Korea's Kospi was down 0.5%, Singapore's Straits Times was less than 0.1% higher, and the Shanghai Composite also edged forward 0.1%.
Other regional risk-currencies benefited from weakness in the dollar. The greenback weakened against the Korean won, to 1,138 from 1,143 late on Tuesday; while the dollar hit a fresh two-month low against the Singaporean dollar at 1.2581, compared to 1.2613 late Tuesday, before softening back to 1.2588 after the session progressed.
The euro was stable at $1.2296, maintaining its 0.2% overnight gain.
In company news, Air China was 0.2% lower, after releasing a profit warning for the first half of 2012, saying that it expects net profit to fall by more than 50% on year, due to a slowdown in demand and higher jet-fuel prices. The small movement suggests that investors had already expected the announcement, as a number of its peers already issued warnings earlier in the month.
Write to Daniel Inman at Daniel.Inman@wsj.com
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