Asia report: Stocks mixed as China's factory activity slows further

Stocks in the Asia-Pacific region were mixed on Wednesday, as investors digested a fresh dump of data from across the region.

Mainland Chinese stocks reached a five-year low, while Australian stocks achieved record-breaking gains by the end of trading in Sydney.

“Asian markets were mostly quiet as a result of numerous earnings and important data releases at the end of the month,” said TickMill market analyst Patrick Munnelly.

“Initially, the Nikkei 225 declined after disappointing industrial production and retail sales data, and was also affected by hawkish comments from the Bank of Japan summary of opinions.”

However, the index gradually recovered all of its losses, Munnelly noted.

“The Hang Seng and Shanghai Composite underperformed following the latest Chinese PMI data, which indicated that the manufacturing PMI matched estimates and remained in contraction territory for the fourth consecutive month.”

Markets mixed as Chinese equities reach fresh lows

In Japan, the Nikkei 225 rose by 0.61% to reach 36,286.71, while the Topix index increased by 0.96% to 2,551.10.

Leading the gainers on Tokyo’s benchmark was Komatsu, which surged by 8.6%, followed by Canon with a 7.85% increase, and Hitachi Construction Machinery, which rose by 6.89%.

Chinese markets experienced a decline, with the Shanghai Composite falling by 1.48% to 2,788.55, and the Shenzhen Component dropping by 1.95% to 8,212.84.

Cultural Investment Holdings and China Enterprise were among the leading losers in Shanghai, declining by 10.09% and 10.07%, respectively.

In Hong Kong, the Hang Seng Index decreased by 1.39% to 15,485.07.

Leading the losses in the special administrative region were Sunny Optical Technology Group, which saw an 11.66% decline, WuXi Biologics with an 8.28% decrease, and ANTA Sports Products, which dropped by 5.06%.

South Korea's Kospi index saw a minor decrease of 0.07% to 2,497.09, with prominent decliners in Seoul including Amorepacific, which fell by 13.04%, and Amore Group, with a 12.14% decrease.

In contrast, Australia's S&P/ASX 200 jumped 1.06% to reach 7,680.70.

Notable gainers in Sydney included Nickel Industries, which saw a 9.66% increase, and Star Entertainment Group, which rose by 5.66%.

New Zealand's S&P/NZX 50 experienced a minor decline of 0.36% to 11,872.10, with Wellington’s bourse led lower by Fletcher Building, which saw a 3.42% decrease, and Oceania Healthcare, with a 2.78% decline.

In currency markets, the dollar was last 0.1% stronger on the yen, trading at JPY 147.76, while it rose 0.32% against the Aussie to AUD 1.5194, and advanced 0.2% against the Kiwi to change hands at NZD 1.6330.

On the commodities front, Brent crude futures were last down 1.01% on ICE at $82.03 per barrel, while the NYMEX quote for West Texas Intermediate fell 1.17% to $76.91.

Factory activity falls further in China, inflation slows down under

In economic news, China's factory activity faced its fourth consecutive month of contraction in January, according to fresh data.

However, there was a modest rebound in the official manufacturing purchasing managers' index (PMI), which climbed to 49.2 from December's six-month low of 49.

The January reading aligned with the expectations pencilled in by Reuters polling.

Meanwhile, China's official non-manufacturing PMI rose to 50.7 in January, up from 50.4 in December.

That boost was attributed to the services sector, offsetting weakness in construction, primarily due to a downturn in the real estate industry.

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

“China will continue to prioritise ‘high-quality’ growth this year, meaning avoiding the kind of big credit-fuelled stimulus via the property sector typical in past cycles,” said Pantheon Macroeconomics chief China economist Duncan Wrigley.

“Local governments are increasingly taking charge of ensuring local property projects are completed, with the rollout of urban real estate financing mechanisms in Chongqing and Nanning, the capital of Guangxi Province, this month.”

Wrigley said ensuring project completions should help restore buyer confidence in the pre-sale system, although only gradually, and with broader consumer confidence.

“Consumers are likely to continue to favour services consumption, leading to spending bumps during Golden Week holidays and over summer.”

In South Korea, official data revealed a cooling of industrial output in December, with the manufacturing production index increasing by 0.6%, a notable drop from the 3.3% surge seen in the previous month.

Despite the slowdown, it still surpassed the expectations of a 0.5% increase set by a Reuters poll.

On the retail front, December saw a decline of 0.8% in retail sales compared to the prior month but managed to record a 2.2% increase year-on-year, following a 1% rise in November.

In Australia, the consumer price index (CPI) for the fourth quarter registered a 4.1% year-on-year increase.

While the figure reflected a slowdown from the 5.4% recorded in the third quarter, it also fell short of the 4.3% forecast by economists polled by Reuters.

It marked the fourth consecutive quarter of declining inflation, and represented the lowest levels in the sunburnt country since December 2021.

The trimmed inflation rate, which excludes the most volatile 30% of items, came in at 4.2%, down from 5.2% in the third quarter.

Finally, Singapore's unemployment rate remained stable at 2% for the fourth quarter, unchanged from the prior period and consistent with the same period in 2022.

According to the country's Ministry of Manpower, total employment excluding migrant domestic workers expanded by 8,400 in the fourth quarter, marking the ninth consecutive quarter of growth.

Furthermore, retrenchments decreased to 3,200 in the fourth quarter, down from 4,110 in the third quarter.

For the entirety of 2023, Singapore's overall unemployment rate saw a decline, dropping from 2.1% to 1.9%.

Reporting by Josh White for Sharecast.com.