Asia report: Markets mixed as consumer prices fall in China

Asia-Pacific markets showed a mixed performance on Thursday after two consecutive days of declines, with a notable divergence in key indices across the region.

Meanwhile, China reported unexpectedly shrinking consumer prices in fresh inflation data.

Patrick Munnelly, market analyst at TickMill, said stocks in Asia were mainly on the rise, taking their cues from a positive night on Wall Street.

“Across most major markets in the Asia-Pacific region, things were looking green, although Chinese markets didn’t quite keep up the momentum,” he said.

“The Nikkei 225 had a strong start, benefiting from recent weakness in the yen, which gave exporters a boost.

“The index eventually crossed the 32,500 handle.”

In contrast, Munnelly said the Hang Seng and Shanghai Composite had a mixed day.

“Mainland China saw a flat to firmer trend, but the latest Chinese inflation metrics hinted at economic fragility, with the nation slipping back into deflation.

“Hong Kong, particularly affected by a drag from the property sector, underperformed, leading to a lower index.”

Most markets in the green, mainland China mixed

In Japan, the Nikkei 225 rose 1.49% to reach 32,646.46, while the Topix index increased by 1.26% to close at 2,335.12.

Leading the gains on Tokyo’s benchmark were Casio Computer Co, surging by 6.97%, Mitsui Engineering & Shipbuilding, up by 5.58%, and Kao Corporation, posting a 4.95% gain.

China’s markets, on the other hand, saw mixed results, as the Shanghai Composite inched up by 0.03% to 3,053.28, while the Shenzhen Component slipped 0.2% to 10,032.09.

Notable performers on Shanghai’s benchmark included Harbin Dongan Auto Engine Co, soaring by 10.01%, and EmbedWay Technologies Shanghai, which surged by 9.99%.

In Hong Kong, the Hang Seng Index declined by 0.33% to 17,511.29, led by Country Garden Services, down by 7.61%, and China Resources Mixc Lifestyle, which saw a 5.69% drop.

South Korea’s Kospi index gained 0.23% to settle at 2,427.08, with Coway rising by 6.68% and KakaoBank posting a 4.57% increase.

Australia’s S&P/ASX 200 advanced by 0.28% to reach 7,014.90, led by Fletcher Building, up by 3.13%, and Virgin Money UK, which saw a 2.91% increase.

New Zealand’s S&P/NZX 50 index rose by 0.41% to 11,197.66, with Mainfreight gaining 9.06% and Meridian Energy increasing by 3.53%.

In currency markets, the dollar was last 0.04% stronger on the yen to trade at JPY 151.04.

Meanwhile, the greenback was red against its downunder counterparts, falling 0.01% against the Aussie to AUD 1.5619 and retreating 0.3% against the Kiwi to change hands at NZD 1.6867.

Oil prices saw modest gains, with Brent crude futures last up 1.04% on ICE at $80.37 per barrel and the NYMEX quote for West Texas Intermediate increasing 1% to $76.08.

Pork price plunge sees China inflation turn negative

In economic news, China experienced deflationary pressure in October, according to fresh data from the National Bureau of Statistics.

The consumer price index (CPI) recorded a 0.2% decline compared to last year’s period, surpassing expectations of a 0.1% drop.

That downward trend was primarily driven by a significant 30.1% reduction in pork prices.

Additionally, the producer price index exhibited a 2.6% decrease year-on-year in October, following a 2.5% drop in September.

Core inflation, which excludes volatile elements like food and fuel, decreased to 0.6% from the previous 0.8%.

Regional head of Asia-Pacific research at ING Robert Carnell argued that China was not dealing with deflation but rather “low underlying inflation”.

“Let’s be very clear about what deflation is and what it isn’t. It is a very pernicious situation, where the ‘general price level’ which includes consumer prices, but also other prices such as real and financial assets and money wages decline,” he said.

“And it leads to a sharp slowdown in economic activity as it deters consumer spending and investment.

“What China has right now, is a low rate of underlying inflation, which reflects the fact that domestic demand is fairly weak.”

Carnell said the data showed that it did not take much of a negative shock from one of the components to push a low underlying headline inflation rate below zero year-on-year.

“If you want to use any term ‘disinflation’ would be my preference, but what we are seeing today is mainly the result of a supply excess, rather than a collapse in demand.”

Reporting by Josh White for Sharecast.com.