Asia report: Markets mixed as PBoC stands pat on rates

Stock markets closed in a mixed state in the Asia-Pacific region on Monday, after China’s central bank stood pat on its benchmark interest rates.

In Japan, the Nikkei 225 was down 0.74% at 25,771.22, as the yen strengthened 0.14% on the dollar to last trade at JPY 134.83.

Automation specialist Fanuc was down 0.46%, while fashion firm Fast Retailing was up 0.91% and technology conglomerate SoftBank Group jumped 3.03%.

The broader Topix index was 0.92% weaker by the end of trading in Tokyo, settling at 1,818.94.

On the mainland, the Shanghai Composite slipped 0.04% at 3,315.43, and the technology-heavy Shenzhen Component jumped 1.26% to 12,487.13.

The People’s Bank of China sated market expectations by keeping its one-year and five-year loan prime rates steady at 4.45% and 3.7%, respectively.

Analysts polled by Reuters had expected the central bank to stick to its policy guns in its monthly meeting for June.

Craig Botham at Pantheon Macroeconomics explained that the loan prime rates measure the cost of borrowing for a panel of banks’ best borrowers, with the five-year rate serving as a benchmark for mortgage lending.

“Given the medium-term lending facility (MLF) rate remained on hold earlier in the month, a change to either LPR was always unlikely,” he said.

“Credit easing has been on hold for some time now, with policy rates, and the provision of liquidity, moving sideways.”

Botham said the PBoC faced “two key constraints”, being currency, and a lack of loan demand.

“Aggressive easing would weaken the first without boosting growth, thanks to the second.

“Policymakers are also still worried about total leverage in any case.

“By now, no one should be expecting a strong Chinese credit cycle this year.”

Elsewhere, South Korea’s Kospi tumbled 2.04% to 2,391.03, while the Hang Seng Index in Hong Kong managed gains of 0.42% to 21,163.91.

Internet firm NetEase plunged 6.68% in the special administrative region, after it announced that the China release of its much-awaited Diablo Immortal game would be delayed.

The blue-chip technology stocks were on the back foot in Seoul as well, with Samsung Electronics down 1.84% and SK Hynix losing 1.97%.

Oil prices were in a mixed state at the end of the Asian day after tumbling over the weekend, with Brent crude futures last unchanged on ICE at $113.11 per barrel, and West Texas Intermediate up 0.31% at $109.90 on NYMEX.

In Australia, the S&P/ASX 200 lost 0.64% to 6,433.40, while across the Tasman Sea, New Zealand’s S&P/NZX 50 slipped 0.01% to 10,588.20.

The down under dollars were both stronger on the greenback, with the Aussie last ahead 0.83% at AUD 1.4299, and the Kiwi advancing 0.7% to NZD 1.5727.

Reporting by Josh White at Sharecast.com.