Asia report: Stocks mixed on fresh China manufacturing data

Asia-Pacific stock markets showed mixed results on Thursday, with notable gains in Japan and New Zealand offset by declines in China and Hong Kong.

Investors digested data showing that China’s factory activity contracted for a fifth consecutive month in August, sparking concerns over the health of the world's second-largest economy.

“There remains an undercurrent of optimism regarding additional policy measures anticipated for China,” said Stephen Innes at SPI Asset Management earlier.

“Nevertheless, tenacious economic apprehensions concerning China persist.

“The current perspective on China's growth trajectory has become increasingly fixated on the pivotal policy choices that Chinese authorities must navigate.”

Innes quipped that, despite coat-tailing the positive read-through from the ‘top-heavy’ US equity market, China was continuing to cast a long shadow over local ASEAN markets.

“If a more comprehensive economic policy is not unleashed, it won't be long before traders price the unfavourable consequence of China falling below the targeted 5% growth for the year.”

Bourses across region finish in mixed state

In Japan, the Nikkei 225 closed up 0.88% at 32,619.34 points, while the broader Topix index also experienced a gain, rising 0.8% to 2,332.00 points.

Companies such as Recruit Holdings, Mitsubishi Corporation, and Tokyu Corporation led Tokyo’s benchmark, posting gains of 3.65%, 3.18%, and 3.02%, respectively.

Conversely, China's markets had a difficult day, with the Shanghai Composite closing down 0.55% at 3,119.88 points and the Shenzhen Component also down by 0.61% at 10,418.21 points.

China Enterprise Co and Beijing Capital Development were among the biggest losers, dropping by more than 10%.

In Hong Kong, the Hang Seng Index mirrored China's negative sentiment, dropping 0.55% to 18,382.06 points.

Companies like Longfor Properties, WuXi Biologics, and Orient Overseas International led the declines, falling by 4.73%, 4.54%, and 4.44%, respectively.

South Korea’s Kospi index declined marginally by 0.19% to 2,556.27, with Samsung Engineering and Korea Zinc among the biggest losers, down by 3.82% and 3.3%, respectively.

In contrast, Australia's S&P/ASX 200 edged up slightly by 0.1% to 7,305.30 points, bolstered by IGO and Harvey Norman Holdings, which surged by 5.46% and 5.21%.

New Zealand's S&P/NZX 50 closed up 0.29% at 11,554.48, helped by strong performances from Genesis Energy and Skycity Entertainment Group, up 5.19% and 4.87%.

In currency markets, the dollar was last 0.22% weaker against the yen, trading at JPY 145.92.

The greenback did, however, strengthened on the Aussie and the Kiwi, with the former last up 0.14% at AUD 1.5465, and the latter ahead 0.21% to change hands at NZD 1.6826

Brent crude oil futures meanwhile increased 0.52% on ICE to $86.31 per barrel, while the NYMEX quote for West Texas Intermediate rose 0.42% to $81.97.

China's factory activity shrinks again, while Japan's retail sales surge

In economic news, China's challenges continued to be a concern, with the official manufacturing purchasing managers' index (PMI) recording a contraction for the fifth consecutive month.

In August, the PMI stood at 49.7, marginally better than economists' expectations of 49.4 and July's figure of 49.3.

However, the reading still remained below the 50-point threshold that separates expansion from contraction.

Furthermore, the non-manufacturing PMI declined for the fifth straight month to 51.0, down from 51.5 in July.

Composite PMI, which combines both manufacturing and service sectors, rose to 51.3, registering its first increase in four months.

“Overall, the latest PMI data indicates tentative signs of stabilisation in manufacturing activity, with new orders and production expanding again in August,” said Kelvin Lam at Pantheon Macroeconomics.

“Out of the 12 components, 10 of them are showing a rising reading, albeit six are still below the key level of 50.

“Looking ahead, manufacturers are still less optimistic about the future, as indicated by the business activity expectation sub-index, which is still below its historical average.”

Despite concerns about manufacturing, consumer spending in China showed signs of life.

According to a survey by the China Beige Book, conducted between August 17 and 25, consumer spending rebounded in August.

The survey included 1,300 businesses, most of which were privately owned

Conversely, the report flagged a worsening scenario in China’s already beleaguered property sector during the same period.

South Korea's economic indicators meanwhile added to the grim picture, as the country’s industrial production decreased for the 10th consecutive month, dropping a substantial 8% in July year-on-year.

That contraction exceeded economists' expectations of a 5.2% fall, and deepened from a 5.9% decline in June.

In a separate data release, South Korean retail sales dropped 3.2% in July compared to the prior month, reversing a 0.9% increase witnessed in June.

In stark contrast, Japan provided some positive economic news.

The nation's retail sales for July surged by 6.8% year-on-year, significantly outpacing the 5.4% increase anticipated by economists.

That rise also exceeded a revised 5.6% growth in June, marking the highest rate of retail sales growth since May 2021’s 8.2% increase, save for a 7.2% bump in March.

Reporting by Josh White for Sharecast.com.