Asia report: Kospi leads gains as Seoul re-bans short-selling

South Korean stocks surged on Monday, leading gains in the Asia-Pacific region after the country re-imposed a ban on short selling.

The move by South Korean financial authorities was set to be in effect until the end of June next year.

Investors also found reassurance in a soft US jobs report on Friday, lowering expectations of imminent interest rate hikes from the world’s largest economy.

“Asia stocks traded higher across the board, benefiting from post-non-farm payrolls momentum from Wall Street on Friday,” said TickMill market analyst Patrick Munnelly.

“Additionally, South Korea’s announcement of a short-selling ban provided a significant boost, causing the Kospi index to surge.

“The Nikkei 225 comfortably maintained levels above 32,500, reaching heights last observed at the end of September.”

Munnelly said the gains in Japan were primarily led by industrial sectors, with upward revisions in the final PMI figures from preliminary data.

“Both the Hang Seng and Shanghai Composite joined the broader regional gains, supported by weekend statements from the Chinese Premier, who mentioned China’s forthcoming plan to promote high-standard institutional opening in the Shanghai Free Trade Zone.

“China’s Finance Minister also expressed the intention to accelerate the issuance and utilisation of government bonds.

“Traders are keeping a close watch on the upcoming Chinese trade balance data scheduled for release tomorrow.”

Markets start week in the green across region

In Japan, the Nikkei 225 index increased 2.37%, closing at 32,708.48, while the Topix index rose 1.64% to 2,360.46.

Standout performers in Tokyo included Sumitomo Electric Industries, which surged by 11.41%, Minebea Mitsumi, with a gain of 9.82%, and Advantest, which saw an increase of 8.15%.

China’s markets also demonstrated positive momentum, with the Shanghai Composite rising by 0.91% to 3,058.41 and the Shenzhen Component gaining 2.21% to reach 10,071.56.

Noteworthy performers in Shanghai included Beijing Worldia Diamond Tools, which surged by 13.87%, and Beijing Dalong Weiye Real Estate Development, with a gain of 10.16%.

Hong Kong’s Hang Seng Index added 1.71%, closing at 17,966.59, led by China Resources Beer Holdings, which rose by 6.59%, Longfor Properties with a gain of 5.52%, and Sino Biopharmaceutical, which saw an increase of 5.67%.

Meanwhile, South Korea’s Kospi index rocketed 5.66%, closing at 2,502.37 after the short-selling ban was announced.

Notable gainers in Seoul included Kumyang, which surged by 29.97%, and POSCO Future M, with a gain of 29.93%.

In Australia, the S&P/ASX 200 index recorded a modest increase of 0.28%, closing at 6,997.40.

Leading performers in Sydney included De Grey Mining, which rose by 7.42%, and Summerset Group Holdings, which gained 6.4%.

New Zealand’s S&P/NZX 50 index also showed positive momentum, with a rise of 1.28% to reach 11,261.22.

Wellington’s gains were led by Serko, which surged by 4.94%, and Pacific Edge, with a gain of 4%.

In the currency markets, the dollar was last up 0.18% on the yen, trading at JPY 149.66, while it advanced 0.07% against the Aussie to AUD 1.5364 and rose 0.14% on the Kiwi to change hands at NZD 1.6697.

On the energy front, Brent crude futures were last up 1.28% on ICE at $85.98 per barrel, while the NYMEX quote for West Texas Intermediate was ahead 1.42% at $81.65.

Korean ban on short selling in focus

In economic news, South Korean financial authorities announced the reinstatement of a ban on short-selling, set to remain in effect until the end of June 2024.

Short-selling involves traders selling borrowed shares intending to repurchase them at a lower price, thus profiting from the price difference.

The ban would apply to all stocks listed on the Kospi, Kosdaq, and Konex markets.

Similar restrictions were lifted in May 2021, with the new decision intended to rectify what was seen as an uneven playing field between organisations and individuals in the stock market.

Financial Services Commission chairman Kim Joo-hyun emphasised the goal of fundamentally resolving that issue in a press release.

In Japan, business activity in October grew at a more subdued pace compared to earlier in the year, according to fresh data from a private survey.

The au Jibun Bank final composite purchasing manager’s index (PMI) registered at 50.5 for October, marking the 10th consecutive month of expansion in private sector business activity.

However, the figure represented a decline from September’s 52.1.

Similarly, the au Jibun Bank Japan services business activity index continued its expansion for the 14th consecutive month in October, recording a reading of 51.6.

That still, however, reflected a slowdown from September’s 53.8, making for the weakest expansion in 2023.

“The good news is that survey participants still feel relatively confident about the business outlook, with the future expectations index slipping 0.2 points to 57.5, still above its long-run average of 53.1 since 2007,” said Kelvin Lam at Pantheon Macroeconomics.

“This is probably reflected in rising hiring activities in October.

“Having said that, the employment index is volatile, and has been oscillating around the key level of 50 the past few months, complicated by the rate of retirements in the ageing workforce.”

Lam noted that the Bank of Japan recently adjusted its yield curve control policy, redefining the 1% upper bound on 10-year Japanese government bond yields as a “reference”, rather than a straight ceiling.

“We think the BoJ is likely to raise the yield target only gradually, taking a view that Japan will still need policy support in the near term.

“We expect easy monetary policy to continue until a meaningful pick up in wage inflation.”

Investors in the region were also digesting Friday’s data from the US Labor Department, showing that the American economy added 150,000 jobs in October, slightly below the Dow Jones forecast of 170,000.

Additionally, the closely watched average hourly earnings data - a key indicator for inflation trends - saw a modest 0.2% increase last month, falling short of expectations.

The unemployment rate inched up to 3.9%, compared to a forecast of 3.8%.

Reporting by Josh White for Sharecast.com.