Asia report: Stocks mixed as RBNZ lifts rates for second time in two months

Markets were mixed at the end of trading in Asia on Wednesday, as New Zealand’s central bank hiked interest rates for the second time in as many months.

In Japan, the Nikkei 225 was down 1.58% at 29,302.66, as the yen strengthened 0.09% on the dollar to last trade at JPY 115.04.

Of the major components on the benchmark index, automation specialist Fanuc was down 0.9%, fashion firm Fast Retailing lost 1.66%, and technology conglomerate SoftBank Group was off 3.31%.

The broader Topix index was 1.16% lower by the end of trading in Tokyo, closing at 2,019.12.

On the mainland, the Shanghai Composite eked out gains of 0.1% to 3,592.70, and the smaller, technology-heavy Shenzhen Composite was near flat, rising 0.11 points to 2,520.48.

South Korea’s Kospi slipped 0.1% to 2,994.29, while the Hang Seng Index in Hong Kong was 0.14% higher at 24,685.50.

The blue-chip technology stocks were going in different directions in Seoul, with Samsung Electronics down 0.66%, while SK Hynix advanced 0.42%.

Oil prices were lower at the end of the Asian day, with Brent crude last down 0.36% at $82.01 per barrel, and West Texas Intermediate losing 0.19% to $78.35.

“Oil bulls [are] taking comfort in the lower-than-expected number of barrels being released from strategic reserves of major economies, including the US, China and India,” said Exinity Group chief market analyst Han Tan.

“Prices could get another boost later Wednesday if the EIA confirms a larger-than-expected drawdown in US inventories, though the whisper number points to a meeker 669,000 barrel drop in contrast to the 1.8 million barrel median estimate.”

Tan said the bigger risk event for oil markets could be next week’s OPEC+ meeting, and whether prices could mount another charge towards the multi-year highs seen in late October.

“Oil bulls could be on the rampage if OPEC+ responds to this coordinated release of reserves by halting its own plans for restoring output.

“Such a move would also dent expectations for markets to shift back into oversupplied conditions by next quarter, which would buffer support for prices as well.”

In Australia, the S&P/ASX 200 was off 0.15% at 7,399.40, with the hefty financials subindex falling 0.26% after making strides in the previous session.

The big four banks finished in a mixed state in Sydney, with Australia and New Zealand Banking Group up 0.88% and Commonwealth Bank of Australia managing gains of 0.37%, while National Australia Bank slipped 0.07% and Westpac Banking Corporation lost 0.05%.

Flag carrier Qantas Airways was down 0.57%, even after confirmation that its lucrative trans-Tasman routes would be more feasible with the reopening of borders between Australia and New Zealand in January.

The two countries share a freedom of movement arrangement similar to the European Union, allowing citizens of either country to live and work in both nations, although both governments had closed their borders with limited exceptions for much of the Covid-19 pandemic.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 was up 0.62% at 12,766.79, as the Reserve Bank of New Zealand raised its official cash rate to 0.75%, from a previous 0.5%.

The move was widely expected by market participants, and followed the RBNZ’s October decision, when it became the first central bank of a G10 currency to raise interest rates in the wake of the Covid-19 crisis.

Its October decision saw the bank raise the cash rate to 0.5% from the record low 0.25%, where it had been held since the start of the coronavirus pandemic in March 2020.

“The [Monetary Policy] Committee agreed it remains appropriate to continue reducing monetary stimulus so as to maintain price stability and support maximum sustainable employment,” the RBNZ said in its statement.

“The committee noted that further removal of monetary policy stimulus is expected over time given the medium term outlook for inflation and employment.”

Wellington’s bourse was also given a boost by the news that New Zealand’s borders would finally be reopening.

The government confirmed during the afternoon that travellers to the country would no longer need to go through mandatory, supervised ‘managed isolation and quarantine’ (MIQ), with the requirement being lifted for travellers from Australia in January.

New Zealand citizens and residents arriving from other countries would be exempted from quarantine from February, with the borders expected to open to all other passport holders from April.

Stocks with exposure to the tourism sector were mixed, with flag carrier Air New Zealand ascending 0.95% and airport operator AIAL ahead 1.27%, while tourist vehicle provider THL slid 3.08%.

The down under dollars were mixed against the greenback, with the Aussie last off 0.25% at AUD 1.3871, and the Kiwi retreating 0.62% to NZD 1.4478.

“An overnight rate hike from the RBNZ marked the second this year, although weakness in the New Zealand dollar highlighted the feeling that the risks posed by the country’s reopening could limit to a slower tightening timeline going forward,” said IG senior market analyst Joshua Mahony.