Asia report: Stocks higher across region as Nikkei nears 40k

Markets in the Asia-Pacific region were in the green on Friday, with Japan's Nikkei 225 leading gains as it neared the psychologically-significant 40,000 level.

Chinese markets showed modest increases, while traders in South Korea enjoyed the day off for the 1 March public holiday.

“The new month starts with Japan's Nikkei average hitting a new high above the 40K handle, following the S&P 500 and Nasdaq closing at record highs on Thursday, driven by tech stocks related to AI,” said TickMill market analyst Patrick Munnelly.

“Nvidia, a major chipmaker, contributed significantly to the benchmark indexes, while AMD, a smaller rival, also saw a surge.”

Munnelly noted that most Asian equity markets were higher.

“China's composite PMI for February remained unchanged at 50.9, indicating weaker manufacturing but stronger growth in other areas.

“Bank of Japan Governor Ueda suggested that it would take time to determine if the price target had been met, hinting that an immediate interest rate hike is unlikely.”

Markets close higher across Asia-Pacific region

In Japan, the Nikkei 225 jumped 1.9% to close at 39,910.82, just shy of the coveted 40,000 mark, while the broader Topix index rose by 1.26% to 2,709.42.

Leading the gains on Tokyo’s benchmark were companies like Kawasaki Kisen Kaisha, Japan Steel Works, and Renesas Electronics, with notable increases of 8.32%, 6.18%, and 5.48%, respectively.

China's Shanghai Composite edged up 0.39% to 3,027.02, and the Shenzhen Component gained 1.12% to 9,434.75.

Cultural Investment Holdings and Heilongjiang Transport Development were the top performers in Shanghai, surging by 10.23% and 10.06%, respectively.

In Hong Kong, the Hang Seng Index saw a moderate increase of 0.47%, closing at 16,589.44.

Meituan, China Unicom Hong Kong, and Lenovo Group were among the top gainers, rising by 10.78%, 6.99%, and 4.84%, respectively.

Australia's S&P/ASX 200 climbed by 0.61% to 7,745.60, with Life360 and Arcadium Lithium standing out with impressive gains of 38.48% and 10.31%, respectively.

In New Zealand, the S&P/NZX 50 edged up marginally by 0.03% to 11,744.39.

Mercury NZ and Investore Property were among the top performers, registering increases of 2.84% and 2.8%, respectively.

Currency markets saw minor fluctuations, with the dollar last up 0.25% on the yen to trade at JPY 150.36, while it dipped 0.13% against the Aussie to AUD 1.5371, and decreased 0.19% on the Kiwi to change hands at NZD 1.6396.

Oil prices experienced modest gains, with Brent crude futures last up 1.12% on ICE at $82.83 per barrel, and the NYMEX quote for West Texas Intermediate increasing 1.15% to $79.16.

China manufacturing activity contracts again in February

In economic news, official figures revealed China's manufacturing activity contracted for the fifth consecutive month in February.

Data from China’s National Bureau of Statistics indicated that the manufacturing purchasing managers' index (PMI) dropped to 49.1 from 49.2 in January, aligning with expectations from a Reuters poll.

The decline stood in contrast to the private Caixin/S&P Global manufacturing PMI, which showed a slight increase to 50.9 from 50.8 in the prior month, indicating expansion.

A PMI reading above 50 signifies expansion, while below indicates contraction.

“Premier Li is likely to announce tax, credit and trade-in incentives for auto and home appliance purchases at next week’s National People’s Congress,” said Pantheon Macroeconomics chief China economist Duncan Wrigley.

“Special bond funding for infrastructure investment will probably be similar to last year, based on the 2024 advanced quotas in local government plans; the main difference is higher quotas in fiscally sound developed regions, and steep cuts in developing regions that are struggling with the existing debt loads.

“Stepped-up developer funding support - notably in the 214 urban real estate financing mechanisms set up in 29 provinces over the last month or so - should speed up project completion, at least for the whitelisted projects.”

But Wrigley said new residential demand was yet to pick up decisively, adding that more support was needed, especially for lower-tier cities.

“China’s recovery is likely to make only gradual gains this year, as policymakers balance short-term growth with refashioning the economic model away from property sector reliance towards high-tech manufacturing.”

Meanwhile, Japan faced challenges as its factory activity shrank at the fastest rate in more than three years in February due to weakening demand.

The au Jibun Bank flash Japan manufacturing PMI plummeted to 47.2 from January’s 48.0, marking the ninth consecutive month of contraction.

That contraction represented the sharpest decline since August 2020, according to au Jibun Bank's analysis.

However, Japan’s unemployment rate remained stable in January compared to the prior month, holding at 2.4%, in line with expectations.

Additionally, the jobs-to-applicants ratio remained unchanged at 1.27 in January, according to separate government data.

“The Bank of Japan will be laser-focussed on whether the spring wage talks still yield a robust hike in mid-March, despite the underlying sluggishness in the labour market,” Duncan Wrigley at Pantheon said.

“The apparent weakening in the new export order indexes is probably just noise, given that Japanese shipments of cars and chips were strong in January, and that Korean working day-adjusted exports jumped 12.8% year-on-year in February, suggesting robust trade demand.”

In South Korea, February saw a notable 4.8% year-on-year increase in exports, totalling $52.41bn, driven by robust demand for semiconductors, as per preliminary government data.

The growth surpassed Reuters' estimates of a 1.9% increase but marked a slowdown compared to the 18% growth recorded in January.

Conversely, imports in South Korea declined by 13.1% in February, a steeper decrease than the anticipated 10.4% drop.

Reporting by Josh White for Sharecast.com.