Asia report: Stocks mixed as Beijing keeps medium-term rate on hold

Markets in the Asia-Pacific region finished with a mixed performance on Monday.

Stocks in mainland China managed to pare back earlier losses, after the country's central bank decided to maintain its medium-term policy rate.

“Asian stocks traded within a narrow range due to the absence of significant catalysts over the weekend,” said TickMill market analyst Patrick Munnelly.

“Global markets were expected to have a subdued session on Monday as a result of the extended weekend in the US.

“The Nikkei 225 continued its upward trend, briefly reaching the 36,000 handle for the first time since 1990.”

Munnelly added that the Hang Seng and Shanghai Composite experienced volatility after the People's Bank of China chose not to cut its one-year MLF rate.

“In the upcoming data-heavy week, China's fourth quarter GDP, December industrial production, retail sales, urban investment, unemployment, house prices, and foreign direct investment will be closely watched for their potential impact on global central bank expectations.”

Markets finish in mixed state across region

In Japan, the Nikkei 225 rose by 0.91%, closing at 35,901.79, while the Topix index gained 1.22%, settling at 2,524.60.

The positive momentum on Tokyo’s benchmark was driven by Kawasaki Kisen Kaisha, which surged 9.6%, SKY Perfect JSAT with a 6.44% increase, and Daiwa Securities Group, which rose 5.94%.

Mainland China’s markets presented a mixed picture, with the Shanghai Composite edging up by 0.15% to reach 2,886.29, while the Shenzhen Component experienced a slight decline of 0.36% to close at 8,963.93.

Leading the gainers in Shanghai were Huali Industries, up 10.03%, and Huadian Heavy Industries, rising by 10.02%.

In Hong Kong, the Hang Seng Index recorded a modest decline of 0.17%, closing at 16,216.33.

Notable losers in the special administrative region were Baidu, which tumbled by 11.53%, Li Auto with a 4.28% decrease, and Sunny Optical Technology, experiencing a 3.81% drop.

South Korea's Kospi showed relative stability, with a marginal gain of 0.04% to finish at 2,525.99.

Hanmi Science stood out as a top performer, surging by 12.76%, while KakaoBank posted a 6.97% increase.

Australia's S&P/ASX 200 encountered a slight dip of 0.03%, closing at 7,496.30, led lower by IGO and Arcadium Lithium, both down by 5.83%.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 index faced a 0.72% decline, settling at 11,772.90.

Wellington’s losses were led by Summerset Group and Arvida Group, with decreases of 2.5% and 2.48%, respectively.

Turning to currency markets, the dollar was last up 0.55% on the yen, trading at JPY 145.67.

The greenback also strengthened by 0.34% on the Aussie to reach AUD 1.5009, while it rose 0.75% against the Kiwi, changing hands at NZD 1.6142.

In the energy sector, oil prices were in the red, with Brent crude futures last down 0.66% on ICE at $77.77 per barrel, and the NYMEX quote for West Texas Intermediate falling 0.77% to $72.12.

China’s central bank unexpectedly keeps rates on hold

In an unexpected decision on Monday, the People's Bank of China (PBoC) chose to maintain its one-year medium-term policy rate at 2.5%.

The decision came as a surprise to many market participants, as expectations indicated by a Reuters poll were for the central bank to lower the rate.

The rate decision affects CNY 995bn of one-year medium-term lending facility (MLF) loans.

“Falling US yields have eased pressure on the yuan, leading to a rebound in China’s foreign reserves in the last two months,” said Duncan Wrigley at Pantheon Macroeconomics.

“From this angle, China will have room to cut interest rates this year. January is usually an outsized month for new loans, accounting for 17% of total new loans last year.

“Policymakers will be watching January’s money and credit data to gauge credit demand, especially outside policy-sensitive sectors like infrastructure.”

Reporting by Josh White for Sharecast.com.