Asia report: Nikkei reaches record high amid strong regional gains

Stock markets across the Asia-Pacific region surged on Thursday, buoyed by Japan's Nikkei hitting a record high, despite concerning business activity data from the country.

Patrick Munnelly, market analyst at TickMill Group, said most markets in the region saw gains, driven by the positive performance of US tech futures following Nvidia's “blowout earnings” overnight suggesting a tipping point in the global artificial intelligence (AI) boom.

“The Nikkei 225 performed well, reaching new intraday record highs above 39,000, supported by strength in the tech sector.

“The Kospi edged higher after the Bank of Korea decided to keep rates unchanged and suggested that a rate cut was unlikely in the near future.

“Both the Hang Seng and Shanghai Composite also saw gains, although there was choppy trading in Hong Kong due to US-China chip-related tensions, while mainland China remained stable following efforts to maintain stability.”

Japan’s benchmark leads gains across the region

In Japan, the Nikkei 225 leapt 2.19% to reach 39,098.68, while the broader Topix index also climbed 1.27% to 2,660.71.

Leading the gains on Tokyo’s benchmark was Mitsui Engineering & Shipbuilding, which surged 26.22%, followed by Dainippon Screen Manufacturing with a 10.16% increase, and Advantest Corporation, up by 7.49%.

China's markets also saw positive momentum, with the Shanghai Composite rising by 1.27% to 2,988.36 and the Shenzhen Component gaining 0.76% to 9,043.75.

Standout performers included Guangxi Fenglin Wood Industry Group, which added 10.19%, and Duolun Technology Corporation, up by 10.09%.

In Hong Kong, the Hang Seng Index climbed by 1.45% to 16,742.95, with Zhongsheng Group Holdings, Trip.com Group, and CNOOC registering gains of 7.49%, 7.3%, and 5.85%, respectively.

South Korea's Kospi index edged up by 0.41% to 2,664.27, supported by notable performances from Samsung SDS, which rose by 6.85%, and SK Square, up by 5.19%.

Australia's S&P/ASX 200 index saw a marginal increase of 0.04% to 7,611.20, with standout performers including Insignia Financial, which surged by 13.72%, and Lovisa Holdings, up by 10.39%.

Meanwhile, New Zealand's S&P/NZX 50 index gained by 0.86% to 11,690.25, with Fletcher Building recording a 9.66% increase and Synlait Milk rising by 4.35%.

In currency markets, the dollar was last down 0.1% on the yen, trading at JPY 150.15, while it fell 0.54% against the Aussie to AUD 1.5182, and by 0.5% on the Kiwi to change hands at NZD 1.6099.

Oil prices saw modest gains, with Brent crude futures last up 0.43% on ICE to $83.39 per barrel, and the NYMEX quote for West Texas Intermediate climbing 0.49% to $78.29.

Bank of Korea stands pat on rates, Japan manufacturing contracts further

In economic headlines, the Bank of Korea kept its policy interest rate on hold at 3.5% for the ninth straight time, in line with market expectations.

According to BoK governor Rhee Chang-yong, one board member was open to a rate cut given the relieving inflation pressure due to soft consumption.

“It would be difficult to cut rates in the first half of the year,” Rhee said, adding that most board members believed it was premature to discuss interest rate cuts, in light of still-elevated inflation.

Elsewhere, au Jibun Bank's Japan flash manufacturing purchasing managers' index (PMI) for February fell to 47.2, down from January's 48.0 reading.

That marked the ninth consecutive month of contraction in private sector business activity.

According to au Jibun, a sharp decline in new orders led to the fastest rate of production shrinkage in a year.

The continued downturn in manufacturing raises concerns about the strength of Japan's economic recovery.

“The Bank of Japan will be cheered by the gradual easing in cost pressures across the board, but dismayed by the mixed activity readings for manufacturing and services,” said Duncan Wrigley at Pantheon Macroeconomics.

“The big question is whether the strong labour demand in the services sector gives workers enough bargaining power to drive up broad wage growth meaningfully.”

Wrigley said the bank was likely to use the results of the spring union wage round, due in mid-March, as a pretext to end the negative rate policy, even if the inflation and economic data did not fully support that.

“But with the Fed now looking likely to make its first rate cut until May, the BoJ will probably sit tight until June.”

Elsewhere, Australia's Judo Bank composite PMI for February painted a more positive picture, registering at 51.8, up from 49.0 in January.

The 50 mark in PMI readings separates growth from contraction, and so the uptick indicated a return to growth in private sector activity for the first time in five months, and at the fastest rate since last April.

According to Judo Bank, the growth was primarily driven by the service sector, with higher new business supporting expansions in output and employment.

Reporting by Josh White for Sharecast.com.