Asia report: Markets mixed after MSCI misses China

Markets in Asia ended mixed on Wednesday, with Chinese markets leading the gains as investors brushed off a decision from index provider MSCI on Tuesday not to include mainland-traded A-shares in its key emerging markets index just yet.

In Japan, the Nikkei 225 put the brakes on its four-session losing streak to finish up 0.38% at 15,919.58.

The Shanghai Composite Index added 1.57% to close at 2,886.92 while the Shenzhen Composite gained 3.12% to 1,889.86.

MSCI’s A-share decision came after a number of institutional investors said they wanted improvements in accessibility to China markets.

In its decision, MSCI said it was monitoring the implementation of the recently-announced policy changes and will gather feedback from market participants.

Chinese stocks currently listed in MSCI’s emerging markets index are US or Hong Kong-traded.

Analysts said the extremely domestic nature of China’s markets meant the MSCI decision should not have a direct influence on onshore equities.

“Even if the A-shares were partially (5 percent) included, the direct influence to onshore equity markets would be marginal in the near term, as it would trigger a total inflow of only $22 billion into China's equity market over the course of one year,” said ANZ’s David Qu and Raymond Yeung.

Before markets opened, the People’s Bank of China fixed renminbi’s loose peg to CNY 6.6001 to the USD - its lowest levels since early 2011.

The onshore yuan can trade 2% above or below the greenback under central bank rules.

One market boosted after the MSCI’s decision was Pakistan’s, with the benchmark KSE100 up 2.78% at 38,559.87.

Pakistan was included in the MSCI Emerging Markets index as of Tuesday, with Karachi’s benchmark index one of the region’s best-performing in the year to date, up more than 17%.

Oil prices retreated during Asian trading, after a fresh data release late on Tuesday showed a surprise increase in US crude inventories last week.

The American Petroleum Institute showed stockpiles rose by 1.2 million barrels in the week to 10 June, to a total of 536.7 million, compared with analyst forecasts of a 2.3 million barrel decrease.

Brent crude was last down 1.49% at $49.10 per barrel, and West Texas Intermediate was down 1.15% at $47.94.

In Korea, the Kospi was odd 0.16% to 1,968.83, while Hong Kong’s Hang Seng Index closed up 0.39% at 20,467.52.

Australia’s S&P/ASX 200 was off 1.08% at 5,147.10, with all of its subindexes finishing lower.

Shares in Virgin Australia plummeted 11.86% after the ailing airline said it has plans to raise AUD 852m through an equity rights issue - taking its recent fundraising efforts to around AUD 1bn.

Stock will be offered at 21 Australian cents per share, far below Tuesday’s close of 29.5 Australian cents.

The airline has been undergoing a major ownership shake-up in recent weeks, with HNA Aviation buying a major chunk, and the once-largest shareholder Air New Zealand selling down most of its stake to Nanshan Group.

Despite this, Air New Zealand said it would still take part in the rights issue, even though it plans to offload its remaining 2.5% stake.

In New Zealand, the S&P/NZX 50 rose 0.5% to 6,859.56, led by dairy exporter A2 Milk, which rose 12.7% after it raised its full-year guidance and said it is well-placed to handle changes to infant formula regulations in its main market of China.

The Kiwi dollar moved 0.67% closer to the greenback, and was last ahead by 0.67% at NZD1.4204, while the Aussie was 0.57% stronger at AUD 1.3512.