Asia report: Markets mixed as China stimulus fails to excite

Asia-Pacific markets showed a mixed performance on Monday as China’s latest economic data and a newly announced five-year stimulus package failed to inspire investor confidence.

Despite the government’s CNY 10trn (£1.08trn) plan to address local government debt concerns, analysts questioned whether the measures would be enough to drive meaningful growth.

China's October inflation data, which fell short of expectations, added to concerns about the sluggish recovery in the world's second-largest economy.

“In contrast to Wall Street's record highs from Friday and futures suggesting more strength at the reopen, Hong Kong stocks led Asia's Monday falls as Beijing's most recent stimulus failed to meet investor expectations,” said TickMill’s Patrick Munnelly.

“With Donald Trump winning the US presidential election and pro-crypto candidates being elected to Congress, Bitcoin surged to its highest level ever, raising hopes for a lax regulatory framework.

“In comparison to major rivals, the dollar was trading close to its four-month high last week as traders got ready for a series of Federal Reserve speakers, including chair Jerome Powell, to share their thoughts on the economic outlook and policy.”

Munnelly noted that after the “excitement” of the US election and the Federal Reserve's rate decision, this week would be an “intriguing but low-key” time for event risk.

“These developments, as well as China's announcement of fiscal stimulus measures that fell short of expectations, will continue to have an impact on markets.”

Markets start the week in mixed state

In Japan, the Nikkei 225 gained marginally by 0.08% to close at 39,533.32, while the Topix slipped by 0.09% to 2,739.68.

Standout performers on Tokyo’s benchmark included DeNA, which surged 17.28%, and Furukawa Electric, up 14.8%.

China’s major indices saw gains, with the Shanghai Composite rising 0.51% to 3,470.07 and the Shenzhen Component up by a more substantial 2.03%, closing at 11,388.57.

Fujian Forecam Optics led gains in Shanghai with a 19.99% increase, followed by Suzhou TZTEK Technology and Ningbo Ronbay New Energy Tech, which climbed 18.3% and 15.08%, respectively.

Conversely, Hong Kong’s Hang Seng Index fell by 1.45% to 20,426.93.

Real estate and consumer stocks were among the hardest hit, with Longfor Properties declining 5.1%, and China Resources Beer down by 4.62%.

South Korea’s Kospi 100 also slid, losing 1.46% to end at 2,521.43.

Notable declines in Seoul came from F&F, down by 10.2%, and Lotte Chemical, which fell 10.01%.

Australia’s S&P/ASX 200 dropped 0.35% to 8,266.20, weighed down by declines in mining stocks.

Champion Iron lost 9.76%, while Iluka Resources and Fortescue were down 7.89% and 7.32%, respectively.

New Zealand’s S&P/NZX 50 also declined, shedding 0.66% to 12,686.33, led by losses in KMD Brands and Pacific Edge.

In currency markets, the dollar was last 0.71% stronger on the yen to trade at JPY 153.72, while it weakened 0.07% against the Aussie to AUD 1.5180, and retreated 0.03% from the Kiwi, changing hands at NZD 1.6754.

Oil prices softened, with Brent crude futures last down 1.18% on ICE at $73.00 per barrel, and the NYMEX quote for West Texas Intermediate down 1.44% at $69.37.

BoJ could consider rate hike by late next year

In economic news, Japan’s central bank signalled that it could consider a rate hike to 1% by late 2025, contingent on meeting economic growth and inflation targets.

In its October meeting summary, the Bank of Japan noted that, despite aiming to gradually normalise monetary policy, it remained cautious amid ongoing market uncertainties.

The BoJ highlighted a divergence from the US Federal Reserve’s monetary stance, cautioning that the contrast could lead to significant foreign exchange volatility.

China's inflation rate meanwhile dipped to 0.3% in October in data released late last week, falling below the forecast 0.4% and marking a decline from the previous month’s 0.4%, according to data from LSEG.

The drop represented the second consecutive month of slower inflation, bringing it to its lowest level in four months.

Reporting by Josh White for Sharecast.com.