Asia report: Most markets rise despite China manufacturing slump

Most markets in Asia finished higher on Monday - with the marked exception of bourses in Australasia - even as fresh manufacturing data from China showed the sector was performing significantly worse than anticipated.

In Japan, the Nikkei 225 was up 0.95% at 21,344.08, as the safe-haven yen strengthened 0.31% against the dollar to last trade at JPY 107.56.

Of the major components on the benchmark index, automation specialist Fanuc was up 0.89%, fashion firm Fast Retailing rose 1.55%, and technology giant SoftBank Group was 0.5% firmer.

Electronics conglomerate Sharp was also a leading riser, adding 2.2% amid reports the firm was going to start producing face masks as the country faced a major shortage, thanks to the ongoing coronavirus outbreak.

The broader Topix index ended its trading day in the green as well, rising 0.99% to 1,525.87 by the close in Tokyo.

On the mainland, the Shanghai Composite surged 3.15% to 2,970.93, and the smaller, technology-focussed Shenzhen Composite rocketed 3.77% to 1,869.65.

The positive moves in China came despite the latest reading from the unofficial Markit/Caixin manufacturing purchasing managers’ index, which was much worse than expected for February.

It hit 40.3 for the month - a record low - which was much lower than the 45.7 reading forecasts by those polled by Reuters, and was a serious slide from the 51.1 number for January.

The reading also marked a serious swing from growth to contraction territory, which is separated by the 50-point mark.

Over the weekend, Beijing’s official purchasing managers’ index came in at its lowest ever level for February, at 35.7.

That was far below the 46 points anticipated by Reuters’ polling, and was a significant drop from the flat 50 points recorded in January.

South Korea’s Kospi was 0.78% firmer at 2,002.51, while the Hang Seng Index in Hong Kong gained 0.62% to settle at 26,291.68.

Both of the blue-chip technology stocks were higher in Seoul, with Samsung Electronics up 1.48% and SK Hynix surging 4.78%.

The largely positive moves in Asia came as investors pinned their hopes on central bank policy as the Covid-19 coronavirus outbreak spread further globally.

China’s poor PMI figures had raised expectations that the People’s Bank could respond, while markets stateside were also starting to price in action from the Federal Reserve, following comments from Jerome Powell on Friday about taking “appropriate” action.

The Bank of Japan’s governor Haruhiko Kuroda, meanwhile, said on Monday that the central bank would work to bring some stability back to the markets there.

As the day drew to a close in Asia on Monday, more than 85,000 confirmed infections and almost 3,000 deaths had been reported globally from the virus, with the large bulk of those still in China.

“After the worst week since the great financial crisis, stock markets have rebounded on Monday on hopes of some kind of permanent never-ending stimulus,” said Neil Wilson, chief market analyst at Markets.com.

“The Federal Reserve and the Bank of Japan have signalled a strong policy response with emergency statements, whilst Italy will inject €3.6bn into the economy to deal with the virus outbreak.

“Markets are now pricing in a 100% chance the Fed will slash rates by 50 basis points later this month, and increasingly market indications suggest the ECB will also trim rates by 0.1% in April.”

Oil prices were higher as the region went to bed, with Brent crude last up 1.55% at $50.45 per barrel, and West Texas Intermediate adding 1.26% to $45.33.

In Australia, the S&P/ASX 200 fell 0.77% to finish its trading session at 6,391.50, while across the Tasman Sea, New Zealand’s S&P/NZX 50 was 1.4% weaker, closing at 11,103.43.

Australia reported its first case of community transmission and its first death from the virus on Monday, while New Zealand’s markets were rattled by news that the first case of the virus had arrived in the isolated island nation.

Both of the down under dollars were stronger on the greenback, with the Aussie last ahead 0.32% at AUD 1.5314, and the Kiwi advancing 0.11% to NZD 1.5983.