Asia report: Stocks mixed as China manufacturing sector rebounds

Equity markets closed in a mixed state in the Asia-Pacific region on Thursday, after the US Federal Reserve put paid to any hopes of rate cuts in the near-term overnight.

While Hong Kong and South Korea saw positive gains, Japan's equity benchmarks struggled, and Australia faced a downturn.

“Asian markets showed a mixed performance following losses on Wall Street due to concerns in the banking sector and Federal Reserve chair [Jerome] Powell's resistance to a rate cut in March,” said TickMill market analyst Patrick Munnelly.

“However, Chinese Caixin manufacturing data exceeded expectations.

“The Nikkei 225 also declined due to recent currency strength and the influence of various earnings reports on price movements.”

Munnelly noted that the Hang Seng and Shanghai Composite indices had mixed results, initially benefiting from stronger-than-expected Caixin PMI data and additional support measures.

“Gains were limited after a significant liquidity drain by the People's Bank of China, causing the mainland index to gradually reverse course.”

Aozora Bank leads losses in Japan on mixed day for region

In Japan, the Nikkei 225 index experienced a decline of 0.76%, closing at 36,011.46 points, while the Topix index dropped by 0.67% to reach 2,534.04 points.

Notably, Aozora Bank saw a significant decline of 21.49% in its shares, reaching its lowest level in eight months.

The bank issued a profit warning earlier in the session, attributing its full-year net loss projection to its exposure to US commercial real estate loans.

Aozora cited challenges in the US office market due to higher interest rates and the continued impact of remote work, adding that it expected market stabilisation could take another two years.

In China, the Shanghai Composite index dipped by 0.64% to close at 2,770.74 points, while the Shenzhen Component index gained 0.34% to reach 8,240.48 points.

Cultural Investment Holdings and Fujian Aonong Biological Technology Group both faced declines in Shanghai, of 10.2% and 10.07%, respectively.

Hong Kong's Hang Seng Index bucked the trend with a positive gain of 0.52%, closing at 15,566.21 points.

Notable gainers in the special administrative region included Li Ning Co, up 6.14%; Galaxy Entertainment Group, which added 5.91%; and Haidilao International, which was ahead 4.57%.

South Korea's Kospi recorded a strong performance, rising 1.82% to reach 2,542.46 points, with EcoPro Materials up 15.19% and SK Networks ahead 14.55% by the end of trading in Seoul.

In Australia, the S&P/ASX 200 index declined 1.2%, closing at 7,588.20 points, led lower by companies like Emerald Resources and Alumina, which lost 8.38% and 4.72%, respectively.

New Zealand's S&P/NZX 50 index displayed a modest gain of 0.38%, closing at 11,916.78 points, with the gains led by SkyCity Entertainment Group, up 6.35%, and Synlait Milk, which advanced 6.25%.

In currency markets, the dollar was last 0.11% weaker against the yen, trading at JPY 146.76, while it gained 0.87% on the Aussie to AUD 1.5359, and increased 0.57% against the Kiwi to change hands at NZD 1.6440.

In oil markets, Brent crude futures were last up 0.83% on ICE at $81.22 per barrel, while the NYMEX quote for West Texas Intermediate advanced 0.88% to reach $76.52.

China manufacturing sector shows resilience in fresh data

In economic news, China's manufacturing sector continued to show resilience in fresh private data, as the Caixin China manufacturing purchasing managers' index (PMI) for January remained steady at 50.8, matching the December figure.

The performance exceeded economists' expectations, with a Reuters poll pencilling in a median forecast of 50.6.

It was also above the 50-point threshold that separates expansion from contraction.

The reading marked the third consecutive month of expansion in China's factory activity, highlighting a contrast with official data, which indicated patchy growth in the world's second-largest economy.

China's National Bureau of Statistics reported a fourth consecutive monthly contraction in the official manufacturing PMI, which stood at 49.2 in January, compared to 49 in December.

“Firms in the Caixin index are relatively optimistic about the future, with the expectations index rising 1.4 points to 56.8 in January,” noted Duncan Wrigley at Pantheon Macroeconomics.

“The employment index also rose 1.6 points to 49.7, above the long-term average.

“Manufacturing activity should gain strength after Chinese New Year, as the CNY 1trn stimulus filters into infrastructure investment, while exports are likely to rebound gradually, as global demand revives.”

In Hong Kong, the city's gross domestic product (GDP) saw year-on-year growth of 4.3% in the fourth quarter, up from 4.1% in the prior three months.

However, the growth figure fell short of the expectations of economists polled by Reuters, who had anticipated a 4.7% expansion.

For the entirety of 2023, Hong Kong's GDP recorded growth of 3.2%, rebounding from the 3.7% contraction seen in 2022.

In South Korea, positive economic indicators emerged as the country's exports surged to their highest level in 21 months.

January's year-over-year exports increased by a remarkable 18%, reaching $54.69bn, a significant improvement compared to the 5% growth observed in December.

The figure exceeded the expectations of a Reuters poll, which had predicted a 17.8% rise.

January’s surge in exports represented the most substantial percentage increase since May 2022.

Data also revealed a decline in imports by 7.8% in January, following a 10.8% drop in December, which was slightly below the Reuters-polled economists' forecast of a 7.6% fall.

That marked the slowest pace of decline since March 2023.

“We expect the recovery in Korean exports to continue, although the path can be volatile,” Pantheon’s Duncan Wrigley added.

“The recovery will be driven by the semiconductors upturn, partly offset by the uneven recovery from China.”

Wrigley said the latest industrial production data from Japan and Korea suggested a positive outlook for semiconductors demand, underscored by a softening fall in chip making equipment imports in Korea.

“Chipmakers have announced plans to invest in capacity, especially for high-end chips.”

Reporting by Josh White for Sharecast.com.