Asia report: Most markets rise on improved industrial data from China

Asia-Pacific markets ended mostly positively on Wednesday, rebounding from prior losses as investors digested fresh industrial data from China and inflation figures from Australia.

Australia’s weighted inflation rate for August matched expectations, while the deceleration in China’s industrial profits slowed marginally in August.

“Asian equity markets had a mixed performance, influenced by a rebound in Chinese industrial profits that offset the subdued sentiment from Wall Street,” said TickMill market analyst Patrick Munnelly.

“Major US indices continued to decline as the month-end approached, lacking significant catalysts.

“The Nikkei 225 underperformed, briefly slipping below 32,000 before recovering, while the Hang Seng and Shanghai Composite posted gains after the People's Bank of China pledged to enhance policy coordination in its third-quarter monetary policy meeting, emphasising the need for macro policy adjustments.”

Equities rally across Asia; Australasian bourses slip

In Japan, the Nikkei 225 marginally ascended by 0.18% to 32,371.90, while the Topix saw a 0.32% increase, settling at 2,379.53.

Notable movers on Tokyo’s benchmark included Chugai Pharmaceutical Co, which surged by 4.07%, followed by Daiichi Sankyo and Eisai, climbing 3.52% and 3.26%, respectively.

China's markets were also green, with the Shanghai Composite up 0.16% at 3,107.32 and the Shenzhen Component ahead 0.44% at 10,104.32.

The standout performers in Shanghai were EmbedWay Technologies Shanghai and Beijing Cuiwei Tower Co, registering impressive gains of around 10%.

Hong Kong's Hang Seng Index advanced by 0.83% to 17,611.87.

Xinyi Solar Holdings, Hansoh Pharmaceutical Group, and AIA Group led the pack in the special administrative region, with gains of 4.59%, 4.26%, and 3.89%, respectively.

South Korea's Kospi increased 0.09% to 2,465.07, as Hanjinkal took the lead with a 4.31% rise, followed closely by SD Biosensor at 3.65%.

Not all markets celebrated gains, with Australia’s S&P/ASX 200 slipping 0.11% to 7,030.30 as significant decliners De Grey Mining and Evolution Mining dropped 4.7% and 3.48%, respectively.

New Zealand's S&P/NZX 50 declined by 0.23% to 11,316.81, with the most notable downward movement coming from the Fonterra Shareholders Fund, which plunged 12%, while Vista Group International fell by 4.55%.

On the currency front, the dollar was last 0.01% stronger on the yen, trading at JPY 149.09.

The greenback was also higher against the downunder dollars, rising 0.24% on the Aussie to AUD 1.5671 and managing a modest increase of 0.05% against the Kiwi to change hands at NZD 1.6829.

In the energy sector, oil prices were green, as Brent crude futures rose 1% on ICE to $94.90 per barrel, while the NYMEX quote for West Texas Intermediate climbed 1.26% to $91.53.

China's industrial profits, Australia's inflation, and Japan’s interest rate debate in focus

In economic news, China saw a decline in the profits of its industrial firms for the first eight months of 2023, with an 11.7% reduction year-on-year by August.

It marked an improvement over the 15.5% fall during the year's first seven months.

August alone managed a notable upswing, as profits jumped 17.2% year-on-year, marking the first monthly growth since the latter half of 2022, according to the National Bureau of Statistics.

“Overall, profits are on the road to recovery, but the path will be protracted and bumpy given the uneven base from last year,” said Kelvin Lam, senior China economist at Pantheon Macroeconomics.

“With the government slowly rolling out stimulus measures to prop up the faltering recovery, we expect demand to stabilise somewhat in the near term.

“The hastened issuance of special local government bonds these couple of months should help stabilise domestic demand in the short run, with more investment projects expected to kick off in manufacturing and infrastructure.”

Lam also expected the new wave of property measures to gain some traction, adding that it would support sentiment even if the effects were temporary.

“This should bode well for industry profit recovery in the fourth quarter.

“That said, we continue to expect profits to decline on a year-to-date basis for the rest of the year, albeit improving gradually.”

Looking at China's economic prospects, Wang Yiming, a prominent advisor to the People’s Bank of China, said on Wednesday that the nation's economy could see growth exceeding 5% this year.

Contrasting China’s current economic situation with Japan's economic troubles during the 1990s, Yiming dispelled concerns regarding a potential ‘Japanification’ of the Chinese economy, according to Reuters.

The sentiment came on the back of an adjustment to HSBC's growth forecast for China's GDP earlier in the week, from 5.3% to 4.9% for this year and from 4.9% to 4.6% for 2024.

Shifting focus to Australia, the country recorded a 5.2% year-on-year rise in its weighted inflation rate for August, aligning with the predictions of economists polled by Reuters.

The headline inflation was meanwhile reported at 5.5%.

Over in Hong Kong, trade activities decelerated in their decline for August.

Imports decreased by a marginal 0.3% on the year, and exports dropped by 3.7%, improving compared to July’s 7.9% and 9.1% reductions in imports and exports, respectively.

Finally, discussions within Japan’s central bank board over the appropriate time for it to initiate an increase in interest rates intensified, according to the minutes from its July meeting.

The debate resurfaced against the backdrop of inflation consistently surpassing the Bank of Japan’s 2% target for 15 consecutive months.

While some board members believed there was still a considerable duration before any shift in the current negative interest rate policy, others said a sustainable 2% inflation target was fast approaching, hinting at a possible reassessment between January and March next year.

Reporting by Josh White for Sharecast.com.