Asia report: Markets mixed as Australia avoids rating downgrade

Markets in Asia finished mixed on Monday, with Australia rising after it appeared to ward off a possible sovereign rating, while Japan fell in the face of relatively positive trade data.

The island nation’s benchmark Nikkei 225 finished 0.05% lower at 19,391.60, breaking an 11-session run of green closes.

Exports in Japan fell 0.4% year-on-year in November, fresh data showed, but that was significantly less than the 2% decline picked by a Reuters poll.

Imports were down 8.8%, which was also markedly better than the forecast for a 12.6% fall.

The trade surplus, at JPY 153bn, was much narrower than the JPY 227bn expected, and investors may have been reacting to this ahead of the Bank of Japan’s final policy review of the year due on Tuesday.

On the currency front, the yen was last relatively stronger against the greenback, ahead 0.59% at JPY 117.23 per $1.

Over on the mainland, the Shanghai Composite was down 0.15% at 3,118.43, while the Shenzhen Composite was off 0.38% at 1,984.10.

November’s new house price figures were released by Beijing during the day, with prices up 0.6% month-on-month - slower than the 1.1% recorded in October.

Investors took it as a sign China’s efforts to curb runaway house price growth were working.

Mammoth property developer China Vanke plummeted 6.06% to a four month low.

It had also announced on Sunday that it was looking to end a major deal to buy out the property development interests of Shenzhen Metro Group, after shareholders refused to give it their approval.

Geopolitical tensions were high in the People’s Republic as well, after a Chinese naval ship picked up a US naval drone in the South China Sea late last week.

The South China Sea is widely recognised as international waters and the US maintained it was conducting innocuous water tests, but China asserts ownership of the waters in the area and said it was well within its rights.

“This incident is a reminder to markets that geopolitical tensions may deserve more risk premium under the Trump administration,” noted CMC Markets chief market Analyst Ric Spooner.

South Korea’s Kospi was down 0.19% at 2,038.39, while the Hang Seng Index lost 0.85% to settle at 21,832.68.

Oil prices were higher, with Brent crude last uo 0.59% at $55.54 per barrel and West Texas Intermediate 0.33% firmer at $52.07.

In Australia, the S&P/ASX 200 added 0.53% to finish at 5,566.10, with federal treasurer Scott Morrison confirming a AUD 35.6bn budget deficit for the current financial year - 2.1% of GDP.

The deficit was smaller than originally expected - AUD 37.1bn, or 2.2% of GDP - though the country’s budget shortfall was still predicted to widen over the rest of the decade.

Morrison was still pledging to return the sunburnt country to surplus by the middle of 2021 through a programme of higher taxes and lower spending.

S&P Global did note that Morrison’s budget update would have no immediate impact on the country’s AAA credit rating on negative outlook.

It did say that the tax hikes and spending cuts were vital though, to prevent a possible downgrade.

New Zealand shares were up, with the S&P/NZX 50 adding 0.4% to 6,786.25.

It was led higher by infrastructure investor Infratil, which was up 3.7%, rebounding from a five New Zealand cent drop on Friday.

Poultry producer Tegel was also on the up, gaining 3%, bouncing back from a record low last Thursday after it posted a 4% drop in interim earnings.

Both of the down under dollars were weaker against the greenback, with the Aussie last off 0.45% at AUD 1.3751 and the Kiwi slipping 0.01% to NZD 1.4370 per $1.