Asia: Equities rally as China slowdown fears ease despite mixed PMI data

Asian stocks closed mostly higher on Thursday, with investors buoyed by news that concerns over a slowdown in China looked to be easing up.

China’s manufacturing sector remained in contraction territory in September, although figures released on Thursday indicated that the stimulus measures Beijing has implemented over the last couple of months are beginning to pay dividends.

According to government data, factory output improved slightly, edging up to 49.8 from August’s three-year low of 49.7 but below the 50 threshold that indicates expansion for the second consecutive month.

However, the figure was marginally above the 49.7 reading analysts had expected.

The sub-index tracking new orders rose from 49.7 to 50.2, while that for output improved from 51.7 to 52.3, although a gauge of new exports edged lower from 47.9 to 47.7.

Meanwhile, a separate survey conducted by Caixin/Markit revealed the purchasing managers’ index fell to a six-and-a-half year low, slipping from August’s reading of 47.3 to 47.2, although the figure was marginally better than the 47 flash estimate published last month.

“We expect sentiment to begin to improve gradually over the coming months as the stock market stabilises and recent policy support measures continue to feed through into stronger economic activity,” said Julian Evans-Pritchard, China economist at Capital Economics.

With markets in Hong Kong and on mainland closed for a national holiday until the middle of next week, Japan’s Nikkei Stock Average gained 1.92%.

The Bank of Japan´s latest corporate survey showed big manufacturers were more cautious on the economy in the third quarter, largely because of fears of an economic slowdown in China.

The Bank of Japan’s main index gauging the mood among the big manufacturing firms about present business conditions declined from 15 in June to 12 in September.

Elsewhere, South Korea’s Kospi climbed 0.8% and Australia’s S&P/ASX 200 closing 1.80% higher.

“Japan’s Nikkei was helped by hopes of more government, the BoJ policy easing and the China slowdown being stemmed, while Australia is benefiting from similar optimism related to its biggest trading partner China,” said Michael Van Dulken, head of research at Accendo Markets.

On the currencies front, the yen slid 0.18% against the dollar, while the Australian dollar surged 0.88% against the greenback.