Asia report: Chinese stocks jump as industrial profits accelerate

Stocks were mixed at the close in Asia on Wednesday, with markets in mainland China bouncing back from several losing sessions.

In Japan, the Nikkei 225 was down 1.17% at 26,386.63, as the yen weakened 0.51% against the dollar to last trade at JPY 127.88.

It was a negative day for the benchmark’s major components, with automation specialist Fanuc tumbling 5.72%, fashion firm Fast Retailing off 0.41%, and technology conglomerate SoftBank Group slipping 0.25%.

The broader Topix index lost 0.94% by the end of trading in Tokyo, closing at 1,860.76.

On the mainland, the Shanghai Composite jumped 2.49% to 2,958.28, and the smaller, technology-heavy Shenzhen Composite surged 3.94% to 1,821.39.

Fresh data out of Beijing showed China’s industrial profits rising 8.5% year-on-year in the period between January and March, accelerating from 5% in February.

The print helped to turn around sentiment in the People’s Republic, which had been seriously dented in recent days as the Covid-19 lockdown in Shanghai neared the one-month mark.

In the capital Beijing, certain residential complexes were now locked down and mass testing was being expanded after the coronavirus was found to be circulating in the city.

“The state sector drove the increase, offsetting a fall in profits for the private sector, but we can also view this as a split in profitability between large firms and small-to-medium enterprises (SMEs), which policy is still struggling to rectify,” said Pantheon Macroeconomics chief China economist Craig Botham.

“March also saw the beginnings of China’s zero-Covid crunch, which weighed more heavily at this point on coastal provinces, particularly Shenzhen and increasingly Shanghai, hitting private SMEs hardest.

“The global shock also had an impact; by industry, profits rose sharply for coal miners and other suppliers of energy, offsetting a fall for manufacturers.”

Botham said that again, such a split fell along SOE and private, and large-to-small, divides.

“Profits will slump in April, reflecting the spread of zero-Covid restrictions, and the cessation of non-essential economic activity in much of China’s economy.”

South Korea’s Kospi was down 1.1% at 2,639.06, while the Hang Seng Index in Hong Kong was 0.06% firmer at 19,946.36.

The blue-chip technology stocks were on the back foot in Seoul, with Samsung Electronics down 1.66% and SK Hynix losing 2.25%.

Oil prices were in the green at the end of the Asian day, with Brent crude futures last up 0.79% on ICE at $105.82 per barrel, and West Texas Intermediate advancing 0.77% to $102.48 on NYMEX.

In Australia, the S&P/ASX 200 was down 0.78% at 7,261.20, as data out of Canberra showed the country’s consumer price index rising 2.1% quarter-on-quarter in the three months to March.

That was above the 1.7% expectation pencilled in by a Reuters poll of economists.

Major players in the Australian retailing scene were in the red on the news, with Coles Group down 1.98%, Wesfarmers losing 1.35%, and Woolworths Group sliding 2.52%.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 slipped 0.73% to 11,726.39, with discount retailers a particular bright spot in Wellington.

Big-box superstore operator The Warehouse Group was ahead 4.7%, while Briscoe Group added 1.5%.

The down under dollars were both stronger on the greenback, with the Aussie last ahead 0.43% at AUD 1.3978, and the Kiwi advancing 0.11% to NZD 1.5220.