Asia report: Markets mixed as China manufacturing data disappoints

Asia-Pacific markets finished with a mixed performance on Monday as investors reacted to China's latest manufacturing data, which showed a significant decline.

The official purchasing managers' index (PMI) for August revealed that China's manufacturing activity fell to a six-month low, casting a shadow over regional markets.

“China continues to play the role of buzzkill in the global Goldilocks scenario,” quipped SPI Asset Management managing partner Stephen Innes.

“Saturday’s ‘official’ purchasing managers index data delivered a sobering reality check.

“The world’s second-largest economy is sputtering, with factory activity lagging, deflationary pressures mounting, and the call for stimulus growing louder.”

Innes noted that manufacturing hit a six-month low, shrinking for the fourth consecutive month as factory gate prices tumbled and orders dried up.

“Sure, the services sector tried to pick up the slack, but growth there is almost invisible.

“The composite PMI slipped to 50.1 - the lowest since China’s grand reopening in December 2022 - signalling an economy barely managing a pulse.

“So, while the US might be strutting its stuff, China has a long way to go before it can join the Goldilocks party.”

Markets close in a mixed state across the Asia-Pacific region

In Japan, the Nikkei 225 and Topix indexes posted modest gains of 0.14% and 0.12%, respectively, closing at 38,700.87 and 2,715.99.

Gains were led by IHI Corporation, Credit Saison, and Fujikura, which rose by 5.52%, 5.43%, and 4.94% respectively.

China’s markets, however, faced significant pressure.

The Shanghai Composite dropped 1.1% to 2,811.04, while the Shenzhen Component plummeted by 2.11% to 8,172.21.

Major losers in Shanghai included Yijiahe Technology Co, China Building Material Test & Certification Group, and Guangxi Radio and Television Information Network, each falling around 10%.

Hong Kong's Hang Seng Index also suffered, declining by 1.65% to 17,691.97.

New World Development led the losses with a sharp 12.99% drop, followed by China Resources Mixc Lifestyle and Nongfu Spring, which fell by 7.14% and 5.46% respectively.

South Korea's Kospi managed a modest gain of 0.25% to close at 2,681.00, buoyed by a substantial 14.92% surge in POSCO Future M and a 14.29% rise in Posco ICT.

LG Energy Solution also performed well, climbing 6.19%.

Australia’s S&P/ASX 200 index edged up by 0.22% to 8,109.90, with Yancoal Australia, Medibank Private, and Lovisa Holdings among the top performers, posting gains of 3.89%, 3.37%, and 3.09% respectively.

New Zealand's S&P/NZX 50 led the region's risers with a 0.87% increase, closing at 12,555.52.

Restaurant Brands New Zealand saw the highest rise, up 8.67%, followed by Scales Corporation and Serko, which gained 6.47% and 4.38% respectively.

In currency markets, the dollar was last 0.36% stronger on the yen, trading at JPY 146.69, while it weakened 0.26% against the Aussie to AUD 1.4745, but strengthened 0.3% on the Kiwi to change hands at NZD 1.6050.

Oil prices saw slight gains, with Brent crude futures last up 0.13% on ICE to $76.34 per barrel, and the NYMEX quote for West Texas Intermediate increasing 0.2% to $73.70.

China’s manufacturing sector weakens further in August

At the top of the economic agenda was China’s manufacturing sector, which showed further signs of weakness in August as the official purchasing managers' index (PMI) dropped to 49.1, marking a six-month low.

That represented a faster contraction than July’s reading of 49.4, and fell short of the 49.5 median forecast by economists surveyed by Reuters.

The August data marked the fourth consecutive month that the manufacturing PMI had remained in contraction territory, signalling ongoing challenges in the sector.

In contrast, China’s non-manufacturing PMI inched up slightly to 50.3 in August from 50.2 in July, indicating modest growth in the service sector.

There was also a brighter note from the Caixin manufacturing PMI, which rose to 50.4 in August, up from 49.8 in July.

The reading not only indicated a return to expansion but also exceeded the 50.0 forecast by Reuters.

Caixin’s data tends to capture the performance of smaller and private firms, while Beijing’s official measures are more focussed on large and state-integrated sectors.

Elsewhere, Reserve Bank of Australia (RBA) deputy governor Andrew Hauser reaffirmed the central bank’s commitment to maintaining current interest rates, diverging from the US Federal Reserve's approach.

According to the Australian Financial Review, Hauser emphasised that Australia's inflation remained “too high”, justifying the decision to keep rates steady for the foreseeable future.

Reporting by Josh White for Sharecast.com.