Asia report: Markets rise, yen falls after Japan general election

Asia-Pacific markets posted gains on Monday, led by a strong performance in Japan’s stock indices following the country’s general election.

Upward movement was buoyed by a weaker yen, which hit a three-month low against the dollar after Japan’s ruling Liberal Democratic Party lost its majority in the lower house.

“The results of Japan's lower house elections have led to a significant defeat for the Liberal Democrat-Komeito coalition,” said TickMill’s Patrick Munnelly.

“This is likely to contribute to ongoing volatility in the USD-JPY exchange rate as political uncertainty in Japan is compounded by other macro risks, the benchmark Nikkei 225 is trading sharply higher, gaining 1.8%.

“Mainland China stocks recovered from initial declines in early trading on Monday, while Hong Kong stocks also flipped from red to green as investors await potential outcomes of pivotal meetings at home and the US presidential election next week.”

Munnelly noted that China stocks advanced, while Hong Kong’s benchmark posted modest gains.

“China's top legislative body will meet from 4-8 November, with no mention on the agenda of highly anticipated debt and other fiscal measures.

“Earlier, China's central bank announced it had activated its open market outright reverse repo operations facility and would use it to trade with primary dealers in open market operations on a monthly basis.”

Markets make gains across the Asia-Pacific region

Japan’s Nikkei 225 rose 1.82% to close at 38,605.53, while the broader Topix index climbed 1.51% to 2,657.78.

Notable gains on Tokyo’s benchmark came from Chugai Pharmaceutical, which surged 14.35%, while Konica Minolta and Kikkoman Corporation advanced 5.93% and 5.28%, respectively.

In China, the Shanghai Composite gained 0.68% to 3,322.20, and the Shenzhen Component rose 0.62% to 10,685.89.

Strong performers included Shanghai Shibei Hi-Tech, which jumped 11.49%, and China Fortune Land Development, up 10.32%.

Henan Huanghe Whirlwind also posted a 10.14% gain.

Hong Kong’s Hang Seng Index edged up 0.05% to 20,599.36.

Property developers led the gains, with Longfor Properties advancing 4.77% and China Overseas rising 4.11%, while Zhongsheng Group also added 3.95%.

In South Korea, the Kospi 100 index climbed 1.08% to 2,621.09, driven by sharp gains in companies like LF, up 10.19%; SKC, ahead 9.86%; and SK IE Technology, which advanced 8.77%.

Australia’s S&P/ASX 200 index saw a modest increase of 0.12% to 8,221.50.

Among the top performers were ZIP Co, up 3.72%, while Whitehaven Coal added 3.71% and Resmed gained 3.55%.

New Zealand’s markets remained closed for the Labour Day holiday.

In currency markets, the yen’s decline was pronounced amid the political uncertainty in Japan, hitting a low of JPY 153.32 against the US dollar, before rebounding slightly to last trade at JPY 153.03.

The greenback was meanwhile 0.1% stronger on the Aussie at AUD 1.5149, as it gained 0.06% against the Kiwi, changing hands at NZD 1.6740.

Oil prices fell sharply, with Brent crude futures last down 5.79% on ICE at $71.66 per barrel, and the NYMEX quote for West Texas Intermediate dropping 6% to $67.47.

The declines followed reports that Israel’s military strikes on Iranian installations over the weekend resulted in limited damage, as local media downplayed the impact.

Japan political uncertainty in focus, China industrial profits fall sharply

Japan’s election topped the economic agenda in the region on Monday, after the ruling Liberal Democratic Party and its coalition partner Komeito won 215 of the 465 seats in the lower house.

However, opposition parties, including the Constitutional Democratic Party and the Democratic Party for the People, made notable gains.

The shift in the political landscape raised concerns among analysts, who suggest that the uncertainty could influence the Bank of Japan’s decision-making, potentially delaying any plans to raise interest rates.

Meanwhile, China’s economic outlook remained challenging as industrial profits fell sharply in September.

Data from the National Bureau of Statistics showed a 27.1% decline year-over-year, marking the most significant drop since the early days of the Covid-19 pandemic.

The last comparable decline was in March 2020, when profits of large industrial firms plummeted nearly 35%, according to figures from Wind Information.

In the steel industry, China looked to be preparing for potential consolidation, after the China Iron and Steel Association (CISA) highlighted in a statement that the sector was moving into a “stock optimisation” phase.

That, it said, would be characterised by high levels of production, costs, and exports, but low demand, prices, and efficiency.

As a result, steel prices had fallen significantly, squeezing corporate profits as companies faced intense competition in an increasingly challenging market environment.

Reporting by Josh White for Sharecast.com.