Asia report: Markets surge as China reports first quarterly GDP contraction

Markets in Asia finished in positive territory on Friday, with Japan’s benchmark surging, even as China recorded its first quarterly economic contraction since records began 28 years ago.

In Japan, the Nikkei 225 was up 3.15% at 19,897.26, as the yen strengthened 0.05% against the dollar to last trade at JPY 107.87.

Of the major components on the benchmark index, automation specialist Fanuc was up 4.07%, fashion firm Fast Retailing rose 6.27%, and technology conglomerate SoftBank Group was ahead 6.88%.

The broader Topix index was also in the green by the end of trading in Tokyo, rising 1.43% to close at 1,442.54.

On the mainland, the Shanghai Composite was up 0.66% at 2,838.49, and the smaller, technology-centric Shenzhen Composite was 0.34% firmer at 1,750.28.

In fresh data out of China, the country’s first quarter gross domestic product (GDP) shrank by 6.8% year-on-year, according to the National Bureau of Statistics.

That marked the first contraction since 1992, when China first started reporting GDP on a quarterly basis, and reflected the massive economic shutdown ordered by Beijing as the Covid-19 coronavirus pandemic took hold of the country in January and February.

It was also wider than the 6.5% fall expected by economists polled by Reuters, and stood in stark contrast to the 6% growth reported in the last three months of 2019.

Other figures showed that China’s industrial output fell 1.1% in March compared to a year earlier, which was better than the 7.3% drop expected.

Retail sales were down 15.8% in March versus expectations for a 10% decline, while fixed asset investment slid 16.1% year-on-year compared to expectations of a 15% drop.

“We expect a significant sequential recovery in Q2 as economic life returns to normal,” noted economists at Oxford Economics.

“This recovery will be weighed down by weak domestic and foreign demand.”

South Korea’s Kospi was ahead 3.09% at 1,914.53, while the Hang Seng Index in Hong Kong was 1.56% firmer at 24,380.00.

Both of the blue-chip technology stocks were firmer in Seoul, with Samsung Electronics up 4.9% and chipmaker SK Hynix 3.44% higher.

Oil prices were mixed at the end of the Asian day, with Brent crude last up 1.77% at $28.32 per barrel, while West Texas Intermediate slid 7.35% to $18.51.

In Australia, the S&P/ASX 200 added 1.31% by end-of-play, closing at 5,487.50, while across the Tasman Sea, New Zealand’s S&P/NZX 50 was 2.92% stronger at 10,778.72.

Both of the down under dollars were stronger on the greenback, with the Aussie last ahead 0.04% at AUD 1.5804, and the Kiwi advancing 0.4% to NZD 1.6694.