Asia report: Hong Kong surge leads region higher

Stocks in the Asia-Pacific region were higher across the board on Tuesday, with Hong Kong’s benchmark index putting in its best daily performance in 13 years as it recovered from some heavy recent losses.

In Japan, the Nikkei 225 was up 0.33% at 27,678.92, as the yen strengthened 1.01% on the dollar to last trade at JPY 147.21.

Robotics specialist Fanuc was up 1.78%, Uniqlo owner Fast Retailing eked out gains of 0.07%, and tech investing giant SoftBank Group was 2.72% firmer.

Carmaker Toyota was 1.94% lower, however, after it reported a 25% fall in second-quarter operating profit.

Its profit for the three months through September came in at JPY 562.7bn, well below market expectations for earnings of around JPY 772bn.

The broader Topix index was 0.47% firmer by the end of trading in Tokyo, settling at 1,938.50.

On the mainland, the Shanghai Composite added 2.62% to 2,969.20, and the technology-centric Shenzhen Component was 3.24% higher at 10,734.25.

Fresh data on the private sector in China showed factory activity narrowing for the third month in a row, although to a lesser degree than anticipated.

The Caixin manufacturing purchasing managers’ index came in at 49.2 for October, which was better than the 49.0 analysts had expected and was better than the 48.1 print in September.

It was still below the 50-point level that separates expansion from contraction, however, and was in line with Monday’s official manufacturing PMI, which was also 49.2 for the month.

Official PMI data in China is based on large, state-affiliated activity, while Caixin’s surveys are seen as more reflective of private, small-to-medium firms.

Duncan Wrigley at Pantheon Macroeconomics said one nuance of the data was that the Caixin PMI showed a moderating pace of decline, whereas the official PMI deteriorated from growth to shrinking.

“We expect global demand to weaken on the back of high inflation and increasing borrowing costs, compounded by Europe’s energy supply crisis,” Wrigley noted.

“We see little chance of a meaningful shift away from zero-Covid policy before mid-2023, after the leadership transition is complete.

“As a result, China is likely to continue to experience production disruptions and will struggle to revitalise domestic demand.”

South Korea’s Kospi was ahead 1.81% at 1,335.22, while the Hang Seng Index in Hong Kong surged 5.23% to 15,455.27.

Hong Kong’s economy shrank against expectations in the third quarter, according to official data released on Tuesday, with gross domestic product down 4.5% year-on-year.

That was an acceleration from the 1.3% fall in the second quarter, and went against the 0.7% expansion forecast in a Reuters poll.

“The worsened external environment and continued disruptions to cross-boundary land cargo flows dealt a serious blow to Hong Kong’s exports,” the city’s Census and Statistics Department said in its statement.

Technology plays were in the green in the special administrative region, on the back of the better-than-expected Caixin manufacturing data.

Alibaba Group jumped 7.57%, JD.com gained 8.41%, Tencent Holdings was ahead 10.6%, and Xiaomi was 4.99% firmer.

Data out of South Korea showed the country’s trade deficit widening to $6.7bn in October, from September’s revised $3.78bn deficit.

The Korea Customs Service said imports were up 9.9% year-on-year, while exports fell 5.7%, making for the largest drop in exports in more than two years.

Seoul’s blue-chip technology stocks were in the green, with Samsung Electronics up 1.01%, and SK Hynix 1.45% firmer.

Oil prices were higher as the region went to bed, with Brent crude futures last up 1.38% on ICE at $94.09 per barrel, and West Texas Intermediate 1.39% firmer on NYMEX at $87.73.

In Australia, the S&P/ASX 200 gained 1.65% to 6,976.90, after the Reserve Bank of Australia sated market expectations with its seventh consecutive rate hike.

The central bank added 25 basis points to its cash rate, taking it to 2.85%, which was in line with what economists polled by Reuters had pencilled in.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 was the region’s odd one out, slipping 0.19% to 11,316.64, led lower by Metro Performance Glass, which tumbled 9%.

Both of the down under dollars were stronger on the greenback, with the Aussie last ahead 0.72% at AUD 1.5514, and the Kiwi advancing 1.1% to NZD 1.7011.

Reporting by Josh White for Sharecast.com.