Asia report: Nikkei down on reports of flaccid stimulus package

Markets in Asia were mainly positive by the close on Tuesday, although stocks in Japan sold off on renewed strength in the yen, and local media reported rumours that the much-anticipated stimulus package expected from the government could come across a bit flaccid.

The Nikkei 225 closed down 1.43% to 16,383.04, while the Topix lost 1,39% to close at 1,306.94.

Tokyo’s Nikkei newspaper reported that Prime Minister Shinzo Abe’s stimulus package was looking at a JPY 6trn direct injection into the economy, spread out across the next few years.

That amount is double what was initially planned, the newspaper said, with an announcement coming as soon as next Tuesday.

The package will likely be funded through a supplementary budget, the main spending plat for 2017 and some borrowing, with 2016’s supplementary budget set to provide JPY 2trn, including JPY 1.3trn for public works projects.

Analysts said the package could disappoint, given many have been looking for a JPY 10trn-20 trn injection into the economy.

“If [this package] is the final outcome, and there are a number of permutations to be deciphered, including how the new spending as a portion of the total, markets will rightly be disappointed,” said Patrick Bennett of CIBC Capital Markets.

The yen jumped on the reports, and was last trading 1.35% closer to the greenback at JPY 104.38 per $1.

That put pressure on the country’s exporters, with Canon losing 2.79%, Nissan off 2.33% and Toyota shares down 2.51%.

Canon will likely face more pressure on Wednesday, having released its earnings after the close.

The camera and imaging technology giant saw operating profit fall 35% year-on-year to JPY 68.6bn, widely missing consensus expectations for JPY 81.9bn.

Canon also slashed its operating profit forecast for the calendar year to JPY 265bn from JPY 300bn.

On the mainland, the Shanghai Composite closed up 1.14% to 3,050.18, while the Shenzhen Composite was 1.24% higher at 2,044.96.

In Korea, the Kospi added 0.75% to 2,027.34, while Hong Kong’s Hang Seng Index was up 0.62% at 22,129.73.

Seoul’s markets were boosted by better-than-expected GDP growth for South Korea in the second quarter.

Official data from the Bank of Korea showed real GDP improved by 0.7% quarter-on-quarter, in line with analyst expectations.

Construction investment expenditure, private consumption, facilities investment and investment in intellectual property products all increased, as did production in manufacturing, construction and services.

Year-on-year GDP growth hit 3.2% for the quarter, above forecasts for a 2.9% rise.

“We believe that the 3.2 percent year-on-year growth print for Q2 is likely to represent the high point of 2016 growth, with corporate debt restructuring to weigh heavily on the economy in H2 2016 and a more material slowing in growth to make itself evident in the coming quarters,” said ANZ analysts Glenn Maguire and Eugenia Victorino.

Carmaker Hyundai Motor announced earnings during the session, with second quarter net profit sitting at KRW 1.66trn, down from KRW 1.7trn at the same time last year.

Shares in Hyundai still closed up 0.37%.

South Korean chipmaker SK Hynix was under pressure after the company’s April-June profit was reported at KRW 453bn, in line with analyst forecasts but still the lowest figure since the first quarter of 2013.

Hynix shares closed down 1.38%.

Oil prices were down during Asian trading as oversupply concerns reemerged - data from Genscape suggested inventory growth of 1.1 million barrels for the week to 22 July at the Cushing delivery point in Oklahoma.

Brent crude was last down 0.7% at $44.41 per barrel and West Texas Intermediate had slipped 1.08% to $42.67.

Australia’s S&P/ASX 200 was near flat, adding 0.07% to close at 5,537.47, with the energy subindex losing 1.45% during the session with the lower oil prices.

Santos lost 2.36% and Woodside Petroleum was down 0.84% by end-of-play.

New Zealand’s markets fell for the first time since the global declines after the EU referendum,with the S&P/NZX 50 losing 0.1% to 7,310.39.

Online marketplace Trade Me was among the top decliners, losing 2.8%.

Both of the down under dollars were stronger against the greenback, with the Aussie last 0.78% ahead at AUD 1.3283 per $1 and the Kiwi surging ahead by 1.12% at NZD 1.4133.