Asia: Equities on the back foot despite positive data in China and Japan

Asian stocks declined for a second consecutive day on Wednesday, despite better-than-expected economic data from Japan and China.

The Shanghai Composite Index reversed earlier losses to close flat, while Hong Kong’s Hang Seng Index slid 0.46%, while the Hang Seng China Enterprise Index, an index monitoring Chinese companies with offshore listings fell 1.06%.

According to data released by the National Bureau of Statistics earlier in the session, China registered its 45th consecutive month of producer-price deflation.

Producer prices in the world’s second largest economy declined 5.9% year-on-year in November, in line with the decline registered in October and slightly better than the 6% drop analysts had expected.

Meanwhile, the consumer price index rose 1.5% year-on-year last month, beating expectations for a 1.4% gain and up from the 1.3% advance recorded in October.

“An acceleration in monetary growth and strong wage growth will stoke broader price pressures,” said Julian Evans-Pritchard, China economist at Capital Economics.

“In addition, with the sharp falls in the price of oil and other commodities at the end of last year now starting to drop out of the base for comparison, both CPI and PPI are set to pick-up markedly over the coming months, easing concerns over deflation.”

In Japan, the Nikkei’s Stock Average lost 0.98%, after a better-than-expected reading on machinery orders had triggered what proved to be a short-lived rally.

Core orders rose 10.7% year-on-year in October, compared with an expected 1.5% decline, prompting some analysts to suggest the report could relieve some of the pressure on the Bank of Japan, which was expected to implement further easing policies.

“A sustained recovery in capital spending is certainly good news for policy makers at the Bank of Japan, but we’ll also watch firms’ capital spending plans in Monday’s tankan survey,” said Marcel Thieliant, Japan economist at Capital Economics.

Elsewhere, South Korea’s Kospi was flat, while Australia’s S&P/ASX 200 fell 0.55% after consumer confidence declined in December.

On the currencies front, the yen gained 0.24% against the dollar, while the greenback rose 0.33% against its Australian counterpart.