Asia report: China trade data mixed as Bank of Korea raises rate

Stocks ended the last session of the week in negative territory in Asia, as traders digested fresh data that painted a mixed picture of Chinese trade, and South Korea’s central bank hiked interest rates.

In Japan, the Nikkei 225 was down 1.28% at 28,124.28, as the yen strengthened 0.18% on the dollar to last trade at JPY 113.99.

Fashion firm Fast Retailing surged 8.07% after the company said it would raise prices at its Uniqlo label in the face of higher materials and transport costs.

The comments from chief financial officer Takeshi Okazaki came after the company beat market expectations on operating profit for the November quarter, rising 5.6% to JPY 119.4bn, compared to the less-than-JPY 103bn anticipated.

Elsewhere on the benchmark board, automation specialist Fanuc was down 5.12% and technology investing behemoth SoftBank Group lost 1.24%.

The broader Topix index lost 1.39% by the end of trading in Tokyo, ending the session at 1,977.66.

On the mainland, the Shanghai Composite was off 0.96% at 3,521.26, and the smaller, technology-heavy Shenzhen Composite eked out gains of 0.02%, or just 0.48 points, to 2,435.40.

Customs data out of Beijing during the session showed dollar-denominated exports from China rising 20.9% year-on-year in December, beating the expectations for a 20% expansion picked by analysts polled by Reuters.

Imports, meanwhile, rose 19.5% for the month, which was far short of the 26.3% increase pencilled in by Reuters polling.

Looking at 2021 as a whole, China’s exports rose 29.9% and imports grew by 30.1%, compared to a 3.6% rise and a 1.1% fall in 2020, respectively.

“At least some of this import weakness looks to be a commodity story,” said Pantheon Macroeconomics chief China economist Craig Botham.

“The ending of China’s energy crisis has helped reduce demand for imported coal, and both copper and iron ore imports slowed in December, with the latter shrinking outright in volume terms on the month.

“This reinforces the perception that domestic weakness, driven by the property sector slowdown and its impact on investment, is behind the import slowdown.”

Botham said the deceleration was also widespread across trade partners, both in year-on-year and month-on-month terms, suggesting a spillover of weak demand into non-commodity sectors.

“We think the hit to activity from Covid-19 outbreaks is worse than the purchasing managers’ indices (PMIs) had suggested.”

South Korea’s Kospi was behind 1.36% at 2,921.92, while the Hang Seng Index in Hong Kong slipped 0.19% to 24,383.32.

The Chinese technology sector was on the back foot in the special administrative region, as Alibaba Group fell 2.19% and JD.com lost 2.11%.

Seoul’s blue-chip technology stocks were in the red, with both Samsung Electronics and SK Hynix losing 0.77% by the end of the trading day.

Those moves on the Korean peninsula came as South Korea’s central bank hiked its benchmark interest rate back to pre-pandemic levels.

The Bank of Korea’s policy board raised its benchmark rate by 25 basis to 1.25% - the highest level since central bankers globally slashed interest rates on the emergence of the Covid-19 crisis in March 2020.

It was a move widely expected by market watchers, as the bank looked to put a lid on spiralling consumer inflation and ballooning household debt.

“We had expected a more dovish stance from the BoK, given the renewed global surges of Covid linked to the Omicron variant, which has now also spread to China,” Pantheon’s Craig Botham noted.

“Yet the Bank remains bullish on the prospect for exports, and believes consumption has adapted to the virus, lessening the economic impact of outbreaks.

“One dovish note was struck during Governor Lee’s comments, when he said that now was not the time to consider a ‘tightening’ of policy.”

Other comments, however, indicated that even ‘neutral’ policy settings were some distance away, Botham said.

“We now think a further two rate hikes this year seem the most likely outcome, though we would not expect back-to-back increases. Instead, we see rates rising to 1.5% in the second quarter, and 1.75% in the third.”

Oil prices were higher as the region entered the weekend, with Brent crude last up 1.2% at $85.48 per barrel, and West Texas Intermediate ahead 0.97% at $82.92.

In Australia, the S&P/ASX 200 was 1.08% lower at 7,393.90, while across the Tasman Sea, New Zealand’s S&P/NZX 50 slipped back 0.29% to 12,790.16.

The down under dollars were both weaker against the greenback, with the Aussie last off 0.17% at AUD 1.3756, and the Kiwi retreating 0.14% to NZD 1.4595.