Asia: Equities struggle for direction as energy stocks decline

Asian equities began the week on a mixed note, after Friday’s stronger-than-expected US jobs report paved the way for the Federal Reserve to hike interest rates for the first time in almost a decade.

Japan’s Nikkei Stock Average climbed 0.99%, while the Shanghai Composite Index gained 0.34%, while the Shenzhen Index advanced 1.26%.

Elsewhere, while South Korea’s Kospi fell 0.54% and Australia’s S&P/ASX 200 edged 0.08% higher, although its progress was halted by a decline in energy stocks.

Energy companies were also on the back foot in Hong Kong, where the Hang Seng Index slid 0.15%, with Chinese oil firms dragging the Hang Seng China Enterprises Index down 0.37%.

On the macroeconomic front, optimism among Japanese corporates was mixed in December, according to the results of a widely followed survey.

The Reuters Tankan survey’s gauge of sentiment among manufacturing companies jumped to a reading from +3 to +9, its first improvement in four months, while a barometer for service-sector oriented firms dipped from 22 to 18 - the lowest since November 2014.

On average, the 514 large and medium-sized companies canvassed by Reuters expected sentiment to be largely unchanged over the next three months.

Meanwhile, capital outflows from the People’s Republic of China picked up significantly in November, but that does not foreshadow a “significant” weakening in the currency.

The value of the country’s foreign exchange reserves in US dollars declined by $87bn in November to $3.438trn, below consensus for a $3.493trn reading, as the central bank sold reserves to limit the downward pressure on its currency.

“The pick-up in capital outflows appears to have been predominately driven by increased expectations for renminbi depreciation,” said Julian Evans-Pritchard, China economist at Capital Economics.

“The discount of the offshore renminbi relative to its onshore counterpart, a gauge of market expectations for the currency, widened last month.

“A rise in offshore interest rates due to the increased likelihood of a December Fed rate hike will also have added to outflow pressures.”

A number of Asian currencies fell against the dollar, with the yen falling 0.13% against the greenback, while the Australian dollar fell 0.50% against its US counterpart.

The New Zealand dollar plunged 1.03% against the greenback after hitting a one-month high against the US dollar on Friday.