Asia report: Markets rise, China cuts reserve requirement for banks

Markets in Asia were firmer across the board on Monday, as China’s central bank took the secateurs to its reserve requirement ratio, while Japan’s capital was placed under a fresh set of Covid-19 restrictions.

In Japan, the Nikkei 225 was up 2.25% at 28,569.02, as the yen strengthened 0.03% against the dollar to last trade at JPY 110.11.

Of the major components on the benchmark index, automation specialist Fanuc rocketed 6.6%, fashion firm Fast Retailing added 1.17%, and technology conglomerate SoftBank Group was 2.91% firmer.

The broader Topix index advanced 2.14% by the end of trading in Tokyo, closing at 1,953.33.

Japanese authorities placed Tokyo under a fresh emergency directive during the day, as the metropolitan area grappled with a rise in coronavirus cases ahead of the already-delayed 2020 Summer Olympic games.

Fresh data out of Tokyo, meanwhile, showed Japan’s machine tool orders growth slowing to 96% year-on-year in June, with Pantheon Macroeconomics chief Asia economist putting the slowdown down to the unwinding of “hugely favourable” base effects.

“The story at the margin, however, was mixed,” she said, adding that the continued rise of 2.5% month-on-month was “surprising”, after continuous gains for more than a year.

“The strength was in domestic orders, which spiked 18.1%, after a 2.2% decline in May.

“This likely reflects stockpiling, at least in part.”

In contrast, foreign orders fell for the first time in a year, by 4.5%, after a 2.7% increase in May.

“The data, therefore, present an early caveat for world industrial activity,” Beamish noted.

“Admittedly, the trend in foreign orders has been extremely strong, and remains so for now.

“But the tick down could represent a turning point.”

On the mainland, the Shanghai Composite rose 0.67% to 3,547.84, and the smaller, technology-heavy Shenzhen Composite jumped 1.98% to 2,485.15.

The People’s Bank of China announced a lowering to its reserve requirement ratio for banks of 50 basis points late on Friday, which is the amount of cash banks are required to hold as a percentage of total deposits.

The intention behind a lowering of the requirement would be to increase the supply of money in lending markets, with the move expected to see around CNY 1trn released.

South Korea’s Kospi was ahead 0.89% at 3,246.47, while the Hang Seng Index in Hong Kong gained 0.62% to 27,515.24.

Local media reported a ramping-up of social distancing rules in the wider Seoul metro area, as infections there rose as well.

The blue-chip technology stocks were firmer on the Korean peninsula, with Samsung Electronics up 0.38% and SK Hynix rising 0.42%.

Oil prices were lower as the region went to bed, with Brent crude last down 1.51% at $74.41 per barrel, and West Texas Intermediate off 1.54% at $73.41.

In Australia, the S&P/ASX 200 added 0.83% to close at 7,333.50, while across the Tasman Sea, New Zealand’s S&P/NZX 50 was 0.58% firmer at 12,763.40.

The down under dollars were weaker against the greenback, with the Aussie last off 0.4% at AUD 1.3402, and the Kiwi retreating 0.5% to NZD 1.4357.