Asia report: Most markets fall, China industrial profits growth slows

Markets in Asia were mostly lower at the close on Monday, with Hong Kong’s session truncated by severe weather in the city earlier in the day.

In Japan, the Nikkei 225 was down 0.06% at 29,048.02, as the yen strengthened 0.03% against the dollar to last trade at JPY 110.72.

Fashion firm Fast Retailing was up 2.41%, while among the benchmark’s other major components, automation specialist Fanuc lost 0.3% and technology conglomerate SoftBank Group was off 0.08%.

The broader Topix index was ahead 0.15% by the end of trading in Tokyo, closing at 1,965.67.

On the mainland, the Shanghai Composite was down 0.03% at 3,606.37, and the smaller, technology-heavy Shenzhen Composite managed gains of 0.88% to 2,463.66.

Fresh data out of China’s National Bureau of Statistics showed a 34.6% year-on-year increase in industrial profits for the country in May.

That was still a slowing from the 57% annualised growth reported by Beijing for April.

Pantheon Macroeconomics chief Asia economist Freya Beamish said the year-on-year slowdown was “inevitable”, given the unfavourable base effects generated by the recovery in profits last year.

“Sales growth continued to pick up, with PPI inflation rising further in May, but cost inflation pulled the headline down,” Beamish explained.

“The trend in month-on-month profits rises remains strong, however, with an average of 2.5% so far this year.

“Mining and quarry continue to take the lion’s share of the m/m sales rise, but manufacturing put in a better performance, after a couple of soft months.”

The trend in the latter, however, remained softer, as goods demand came off, Freya Beamish added.

“PPI inflation isn’t done rising yet, and will remain fast through the second half, supporting margins.

“Slack is closing, though, and sustained upward pressure on wage costs will begin to emerge in the second half, beyond any ructions generated by temporary logistical problems.”

Beamish said that at the same time, sales volume growth seemed likely to slow.

“For now, a still robust picture underneath the volatility will give the authorities confidence to start tightening again, once the vaccines begin to win out against Delta.”

South Korea’s Kospi was off 0.03% at 3,301.89, while the Hang Seng Index in Hong Kong was 0.07% weaker at 29,268.30.

Trading in the special administrative region resumed in the afternoon, having earlier been suspended amid a severe weather warning in the city, which was later downgraded.

Hong Kong Exchanges and Clearing said first thing on Monday that morning trading would be delayed for both derivatives and equities due to the storm warning.

A ‘black’ warning in Hong Kong’s storm alert system flags significant rain which has the likelihood to flood roads and infrastructure in and around the metropolitan area.

The blue-chip technology stocks were mixed in Seoul, with Samsung Electronics up 0.37%, while SK Hynix fell 1.95%.

Oil prices were higher at the end of the Asian day, with Brent crude last up 0.03% at $76.20 per barrel, and West Texas Intermediate rising 0.12% to $74.14.

In Australia, the S&P/ASX 200 was off 0.01% at 7,307.30, while across the Tasman Sea, New Zealand’s S&P/NZX 50 was 0.18% lower at 12,603.75.

Lockdown measures were extended in Sydney during the day as more cases of the 'Delta' variant of Covid-19 emerged, while New Zealand's capital Wellington remained in a partial lockdown amid a potential exposure to the variant from a traveller from Australia.

The down under dollars were in a mixed state against the greenback, with the Aussie last 0.1% stronger at AUD 1.3187, while the Kiwi weakened 0.16% to NZD 1.4171.