Asia report: Markets mixed, RBNZ expands QE beyond forecasts

Markets finished mixed in Asia on Wednesday, as investors monitored the global Covid-19 situation, and New Zealand’s central bank stood pat on interest rates but expanded its quantitative easing programme beyond market expectations.

In Japan, the Nikkei 225 was up 0.41% at 22,843.96, as the yen strengthened 0.31% to last trade at JPY 106.82.

Of the major components on the benchmark index, automation specialist Fanuc was up 1.77% and fashion firm Fast Retailing rose 0.8%, while technology conglomerate SoftBank Group fell 2.66%.

SoftBank had posted a return to quarterly profit on Tuesday, recovering from its historic losses in the last financial year.

The broader Topix index rose 1.23% by the end of trading in Tokyo, to settle at 1,605.53.

On the mainland, the Shanghai Composite lost 0.63% to 3,319.27, and the smaller, technology-heavy Shenzhen Composite was 1.26% weaker at 2,215.12.

South Korea’s Kospi managed gains of 0.57% to 2,432.35, while the Hang Seng Index in Hong Kong rose 1.42% to 25,244.02.

The blue-chip technology stocks were mixed in Seoul, with Samsung Electronics up 1.37%, while chipmaker SK Hynix lost 0.37%.

Sentiment was mixed at the start of the Asian day, after US equities swung between the red and the green throughout their session overnight.

Russia’s claims that it has developed and approved a Covid-19 vaccine on Tuesday helped to boost sentiment, though there was widespread scepticism around the country’s testing of the immunisation.

The Russian vaccine is not one of the six recognised by the World Health Organization as being in late-stage human trials.

“Russian declarations that they have approved a working vaccine may have been treated with scepticism, yet there is a feeling that we are approaching a period where such breakthroughs will soon make a tangible difference for the outlook of heavily-hit ‘value’ stocks,” said IG senior market analyst Joshua Mahony.

“With Goldman Sachs speculating that a Covid vaccine would be approached by the end of the year, there is a feeling we are likely to see investors rotate back into the type of riskier stocks that have been hurt the hardest throughout 2020.”

Meanwhile, a stalemate between the Trump administration and Capitol Hill in Washington countered any positive sentiment, as negotiations over further coronavirus relief stateside failed to reach a resolution once more.

Oil prices were higher as the region went to bed, with Brent crude last up 1.4% at $45.12 per barrel, and West Texas Intermediate adding 1.44% to $42.21.

In Australia, the S&P/ASX 200 slipped 0.11% to 6,132.00, as precious metal miners in the sunburnt country fell with the price of gold.

Evolution Mining was down 5.3%, and Kingsgate Consolidated lost 8.73% by end-of-play in Sydney.

Spot gold prices had started to recover at the end of the Asian day, however, last rising 1.15% to $1,933.90 per ounce.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 lost 1.32% to 11,491.91, as the Reserve Bank of New Zealand sated market expectations by keeping the official cash rate at a record low 0.25%.

It did, however, surprise markets by extending its large scale asset purchases to June 2022 to a maximum of NZD 100bn.

That was above TD Securities’ core forecast of $95bn, with senior Asia-Pacific rates strategist Prashant Newnaha saying the upsize and extension should do little to change the average run rate over the horizon period, but would give the central bank scope to front load purchases near term.

“We see no immediate need to pursue alternative options right now, but a lower or negative official cash rate and a ‘Funding for Lending’ programme top the RBNZ's action list,” Newnaha said.

“A vaccine may do away for a negative OCR, but the fact the RBNZ stated this as its first option means negative rates are now a 50-50 bet after March 2021.”

The country was also reeling from a potential resurgence of Covid-19, with four confirmed cases of community transmission and four probable, but not yet confirmed, cases found in Auckland, and not linked to any overseas travel or travel-related contact.

It had been 102 days since a locally-transmitted case of Covid-19 was detected in the community, and almost all coronavirus-related restrictions had been lifted nationally.

As a result of the new cases, the 1.6 million residents of the country’s largest city have been placed back under stay-at-home orders, with only grocery stores and chemists permitted to open, and roadblocks placed at the region’s borders to prevent non-essential movements.

The rest of New Zealand was placed under so-called ‘level 2’ orders, which increased social distancing rules but still allowed people to leave home for work and leisure.

Both of the down under dollars were stronger on the greenback, with the Aussie last ahead 0.09% at AUD 1.4012, and the Kiwi advancing 0.32% to NZD 1.5254.