Asia report: Stocks mixed as Japan's GDP rises, PBoC cuts some rates

Stocks closed in a mixed state in Asia on Monday, after Japan’s economy grew to beyond pre-Covid levels in the latest GDP reading, while investors also digested a surprise interest rate cut and some data releases from China.

In Japan, the Nikkei 225 was up 1.14% at 28,871.78, as the yen strengthened 0.02% on the dollar to last trade at JPY 133.39.

Automation specialist Fanuc was up 1.33%, fashion firm Fast Retailing added 0.92%, and technology conglomerate SoftBank Group jumped 5.17%.

The broader Topix index was 0.6% firmer by the end of trading in Tokyo, settling at 1,984.96.

Japan’s economy recovered beyond pre-Covid levels in the second quarter, with GDP expanding at 2.2% year-on-year, although that was below consensus expectations for 2.6% growth.

The world’s third-largest economy’s size stood at JPY 542.1trn (£3.36trn) at the end of the quarter, taking it above where it was at the end of 2019, while the first quarter data was revised to an expansion from a contraction.

“Japanese second quarter GDP recovered from an essentially flat - after revisions - first quarter, as the economy benefited from a post-Omicron rebound,” said Craig Botham at Pantheon Macroeconomics.

Consumption rose at a seasonally-adjusted annual rate of 4.6%, up from from 1.2% in the first quarter, which Botham said was the “key driver” of the recovery.

Investment also jumped to 3.4%, from a fall of 4.2%, while government spending was slightly stronger, up 2.2% from 1.7%, and net exports made no contribution to growth in the period.

On the mainland, the Shanghai Composite slipped 0.02% to 3,276.09, and the technology-centric Shenzhen Component added 0.33% to 12.460.22.

The People’s Bank of China took the clippers to some of its interest rates in a surprise move on Monday, with the one-year medium-term facility lowered by 10 basis points to 2.75% on CNY 400bn of loans.

Polling from Reuters last week showed unanimous expectations for no change to the rate.

Beijing’s central bank took 10 basis points off its seven-day reverse repo rate as well, taking it to 2%.

In fresh data out of the People’s Republic, both manufacturing and retail sales missed forecasts for July.

Industrial production rose 3.8%, down from the 2.9% recorded for June and well below the 4.6% pencilled in by Reuters polling.

Retail sales, meanwhile, were up 2.7% year-on-year in July, which was a significant miss compared to expectations for growth of 5%.

“A slew of Chinese data has been released showing the Asian giant’s economy lagging behind forecasters’ expectations,” said Steve Clayton, fund manager at HL Select.

“Industrial production, retail sales, fixed-asset investment all came in below estimates, whilst youth unemployment reached a record level of 20%.

“China’s central bank lowered interest rates on a series of key money-market instruments, making a reduction in the rates charged by leading Chinese banks likely when they set their monthly rates next week.”

Clayton said China’s economy was suffering from ongoing Covid lockdowns and a “fragile” property market.

“Developers reported lower rates of investment into new building projects whilst sales of new homes dived by 31% in the year to end-July.”

South Korea’s Kospi was 0.116% firmer at 2,527.94, while the Hang Seng Index in Hong Kong lost 0.67% to 20,040.86.

A number of Chinese companies were on the back foot in the special administrative region, amid news that they were planning to delist their Wall Street-traded shares.

China Life Insurance was down 2.38%, and China Petroleum & Chemical lost 2.95% by the end of the day.

The blue-chip technology stocks were mixed in Seoul, with Samsung Electronics up 0.5%, while SK Hynix closed flat.

Oil prices were lower at the end of the Asian day, with Brent crude last down 3.31% on ICE at $94.90 per barrel, and the NYMEX quote for West Texas Intermediate losing 3.42% to $88.94.

In Australia, the S&P/ASX 200 rose 0.45% to 7,064.30, while across the Tasman Sea, New Zealand’s S&P/NZX 50 advanced 0.5% to 11,789.03.

Both of the down under dollars were weaker against the greenback, with the Aussie last off 1.4% at AUD 1.4238, and the Kiwi retreating 1.45% to NZD 1.5725.

Reporting by Josh White at Sharecast.com.