Asia report: Markets mostly lower as China, Korea data comes in weak

Most markets in Asia finished in the red on Thursday, as official export numbers in South Korea declined and fresh unofficial data out of China showed a contraction in factory activity there.

In Japan, the Nikkei 225 eked out gains of 0.09% to 21,540.99, as the yen weakened 0.05% against the dollar to last trade at JPY 108.83.

Of the major components on the benchmark index, automation specialist Fanuc was up 0.44%, fashion firm Fast Retailing added 0.32%, and technology conglomerate SoftBank Group rose 1.15%.

The broader Topix index was 0.14% higher in Tokyo, to finish its session at 1,567.35.

On the mainland, the Shanghai Composite lost 0.81% to 2,908.77, and the smaller, technology-heavy Shenzhen Composite slipped 0.52% to 1,563.06.

The unofficial Caixin/Markit factory purchasing managers’ index came in at 49.9 for July, which was slightly higher than the 49.6 reading expected by analysts, but still indicated contraction as it was below 50.

It came after Beijing’s official factory PMI on Wednesday showed a third month of contraction on the trot for July.

South Korea’s Kospi was 0.36% weaker at 2,017.34, while the Hang Seng Index in Hong Kong was down 0.76% at 27,565.70.

Hong Kong-listed shares in emerging markets banking giant Standard Chartered were ahead 2.93% after the company reported better-than-expected first half earnings.

The blue-chip technology stocks were mixed in Seoul, with Samsung Electronics falling 0.33% and chipmaker SK Hynix ahead 1.04%.

Fresh trade data out of South Korea showed an 11% fall in exports year-on-year, which was slightly better than the 11.3% decline expected.

Semiconductor exports were a major sore point, falling 28.1%, while imports fell 2.7%, much better than the 8.1% fall expected.

The weak trade data came as Seoul was locked in an ongoing trade dispute with Tokyo, the latter having placed restrictions on the export of high-technology materials to South Korea last month.

Market watchers were holding their breath ahead of a possible escalation of the situation, with Japan prime minister Shinzo Abe’s cabinet expected to endorse the removal of South Korea from its ‘white list’ of preferential trade partners later in the month.

Officials in Seoul said on Thursday that their country’s security partnership with Japan could be weakened if Tokyo went ahead with such a move, after diplomatic talks in Thailand saw no progress made.

Investors began the Asian day digesting the Federal Reserve’s interest rate decision overnight, which saw the central bank cut its rate target by 25 basis points, which was widely expected.

It was governor Jerome Powell’s comments that attracted the biggest reaction, however, after he said that it was not the beginning of an easing cycle, rather calling it a preventive measure to “insure against downside risks”.

“Now the attention shifts to Friday’s nonfarm payrolls, expected at 165,000 in July versus last month’s strong 224,000 read,” said London Capital Group senior market analyst Ipek Ozkardeskaya.

“Other data may also confirm 0.7% increase in US factory orders versus 0.7% decline previously, and a lower trade deficit in June.”

Oil prices were lower as the region went to bed, with Brent crude last down 1.1% at $64.35 per barrel, adn West Texas Intermediate off 1.51% at $57.71.

In Australia, the S&P/ASX 200 was off 0.35% at 6,788.90, with mining company Lynas falling 3.07% as the question of its rare earths operating licence renewal in Malaysia remained unanswered.

Malaysia prime minister Mahathir Mohamad said during the day that his country was awaiting Lynas’ management plan for radioactive waste ahead of the 2 September renewal deadline.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 was up 0.03% at 10,860.82, led higher by energy generator and retailer Mercury, which was ahead 4%.

Both of the down under dollars were weaker on the greenback, with the Aussie last off 0.13% at AUD 1.4625, and the Kiwi retreating 0.22% to NZD 1.5277.