Asia report: Markets mixed as investors digest RBA minutes

Asia-Pacific markets delivered mixed results on Tuesday, with investors keenly assessing minutes from the Reserve Bank of Australia's September policy meeting.

Notably, the bank expressed concerns regarding elevated inflation rates in the country, indicating that the numbers were still "too high."

The minutes further hinted at potential policy tightening if inflation was more persistent than the bank's current expectations.

“Asian equity markets mostly traded lower, mirroring the flat performance in the United States,” said TickMill market analyst Patrick Munnelly.

“The lack of significant catalysts and mounting caution ahead of upcoming central bank decisions contributed to the subdued market sentiment.

“The Nikkei 225 underperformed as recent regional losses caught up with the index after returning from a holiday closure.”

Munnelly added that market sentiment was also dampened as investors questioned whether Bank of Japan governor Kazuo Ueda would use this week's events to lay the groundwork for a potential future policy exit.

“The Hang Seng and Shanghai Composite indices experienced choppy trading, influenced by pressure in the technology sector and mixed fortunes among property stocks.

“However, some downside was mitigated following further talks between the United States and China, and the People's Bank of China's ongoing efforts to maintain liquidity.”

Mixed but lacklustre performance among region’s equities

In Japan, the Nikkei 225 dropped 0.87% to close at 33,242.59, whereas the Topix saw a marginal increase, closing up by 0.08% at 2,430.30.

Notable decliners on Tokyo’s benchmark were concentrated in the tech sector, including Tokyo Electron, which plummeted by 5.23%, followed by Dainippon Screen Manufacturing and Advantest, which decreased by 4.42% and 4.03%, respectively.

In China, the Shanghai Composite edged down slightly by 0.03% to 3,124.96, and the Shenzhen Component was more pronounced in its decline, dropping 0.73% to 10,125.73.

Fujian Furi Electronics took a significant hit in Shanghai, decreasing by 10.04%, while Inesa Intelligent Tech fell 5.68%.

Conversely, the Hong Kong market showcased an optimistic trend, as the Hang Seng Index advanced 0.37% to 17,997.17.

ENN Energy emerged as a leading gainer, soaring by 5.42%, trailed by Techtronic Industries and Orient Overseas International, which rose by 4.08% and 2.94%, respectively.

South Korea's Kospi registered a downward movement, decreasing by 0.6% to 2,559.21.

Significant decliners included Doosan, with a steep drop of 9.53%, and Dongwon System, which slid 4.23%.

The Australian S&P/ASX 200 experienced a decline of 0.47% to 7,196.60, as shares of Block and Insignia Financial dipped 4.49% and 2.87%, respectively.

Meanwhile, in New Zealand, the S&P/NZX 50 fell 0.46% to 11,344.52, with significant losses from Investore Property and SkyCity Entertainment Group, which depreciated by a respective 3.97% and 3.55%.

On the currency front, the dollar was last 0.06% stronger on the yen, trading at JPY 147.70.

Conversely, the greenback weakened against its Aussie and Kiwi counterparts, falling 0.31% and 0.33% to change hands AUD 1.5487 and NZD 1.6844, respectively.

In the commodities space, Brent crude futures were last up 0.7% on ICE at $95.09 per barrel, and the NYMEX quote for West Texas Intermediate saw a more substantial increase of 1.37% to $92.73.

Reserve Bank of Australia minutes point to ongoing inflation concerns

Minutes from the Reserve Bank of Australia’s 5 September policy meeting were in focus after the central bank maintained its benchmark policy rate at 4.1%.

According to the minutes, board members had significant discussions about potentially raising the rate by 25 basis points, although the predominant sentiment leaned towards keeping the rate stable.

The RBA underscored its decision by pointing to recent economic data, which suggested that the current inflation rates could realign with the bank's targets in an acceptable time frame, provided the cash rate remained steady.

It emphasised the importance of gauging the impact of the monetary policy adjustments made since May 2022 before considering any further changes.

Nevertheless, the RBA did not rule out the possibility of future policy adjustments, highlighting that if inflation remained stubbornly high and exceeded expectations, further policy tightening could be on the horizon.

“The RBA opted for a hawkish hold at its policy meeting at the start of this month,” noted analysts at Rabobank.

“In tune with the announcement made the following day by the Bank of Canada, there was a warning that rates may still have to go up further given that inflation remains too high.”

Rabobank said a hawkish hold was one of the options for the European Central Bank and was likely to be adopted by almost all other G10 central banks in the coming months.

“For the time being, RBA policymakers are prepared to hold steady in order to allow the lagged effects of previous rate hikes to take effect and to examine the inflow of economic data.”

Reporting by Josh White for Sharecast.com.