Asia report: Stocks mostly higher on rate hikes, China data

Stock markets in Asia were mostly higher at the close on Wednesday, as two central banks hiked interest rates, and fresh data on Chinese exports beat expectations.

In Japan, the Nikkei 225 was up 0.54% at 26,478.77, as the yen weakened 0.18% against the dollar to last trade at JPY 137.12.

It was a positive day for the benchmark’s major components, with automation specialist Fanuc up 0.74%, fashion firm Fast Retailing adding 1.01%, and technology conglomerate SoftBank Group 2.4% stronger.

The broader Topix index gained 0.29% by the end of trading in Tokyo, ending the session at 1,888.85.

On the mainland, the Shanghai Composite eked out gains of 0.09% to 3,284.29, and the technology-heavy Shenzhen Component was 0.56% firmer at 12,508.89.

Fresh trade data out of Beijing showed dollar-denominated from China rocketed 17.9% higher in June, beating the 12% rise pencilled in by analysts in a Reuters poll.

Imports missed expectations, however, rising just 1%, compared to the Reuters-polled 3.9% forecast.

“The patterns in the country and product data suggest that the surprise export strength in June was driven by continued catch-up demand from China’s reopening, with regional supply chains still making up lost ground and drawing in intermediate goods from China, while resilient US demand - and potentially restocking or hoarding given fears of renewed reopening bottlenecks - also provided some support,” said Pantheon Macroeconomics chief China economist Craig Botham.

“We also detect some seasonality in the data.

“On our seasonally adjusted estimate, exports saw a smaller increase, to 17.6%, from 17.1%.”

Botham said monthly momentum also slowed, with exports growing a seasonally-adjusted 4.2% on the month, from 5.5% in May.

“We stick to our view that Chinese export growth will slow in the second half, though admit that we’ve been wrong for longer than we would like.

“Data from other exporters points to slowing demand, and China’s share of global trade remains elevated.

“The reopening boost has lasted longer than we expected, but it cannot continue indefinitely.”

South Korea’s Kospi was 0.47% higher at 2,328.61, while the Hang Seng Index in Hong Kong slipped 0.22% to 20,797.95.

Airline stocks were in focus in the special administrative region, after the South China Morning Post reported that Hong Kong could manage quarantine-free travel, separately from Beijing’s rules, by November.

The city’s main carrier Cathay Pacific was up 0.59% having reached a new one-year high during the session, while China Southern Airlines ascended 3.15%.

Tianqi Lithium had a tumultuous debut day, meanwhile, tumbling more than 11% from its offer price of HKD 82 per share, before recovering to close flat.

China-based faux-Japanese variety retailer Miniso fell 3.04% by the close on what was also its debut day in Hong Kong.

To the north, South Korea’s central bank met market expectations by tacking 50 basis points onto its key interest rate, bringing it to 2.25%.

The Bank of Korea’s decision marked its biggest rate rise since its current framework was established in 1999.

“Further rate hikes are seen as warranted, suggesting the hiking cycle is not yet complete,” Pantheon’s Craig Botham said.

“Governor Rhee indicated that a gradual 25bp hike process was desirable, with 2.25% close to the bottom of the neutral rate range.

“Mr Rhee said that inflation would likely peak in the third or fourth quarter, largely subject to energy prices, with oil futures now declining.”

Botham said that it sounded as though the cycle should end “fairly soon”, though the governor also said market expectations for an end-year rate of 2.75% were “reasonable” for now.

Seoul’s blue-chip technology stocks were mixed by the end of the day, with Samsung Electronics down 0.17%, while SK Hynix gained 0.75%.

Oil prices were higher at the end of the Asian day, with Brent crude futures last up 0.36% on ICE at $99.85 per barrel, and West Texas Intermediate rising 0.47% to $96.29 on NYMEX.

In Australia, the S&P/ASX 200 added 0.23% to 6,621.60, while across the Tasman Sea, New Zealand’s S&P/NZX 50 managed to rise 0.06% to 11,110.33.

The Reserve Bank of New Zealand also added 50 basis points to interest rates on Wednesday, taking its official cash rate to 2.5%.

Its move was widely expected by markets, and marked the sixth rate rise from the central bank since it became the first G10 currency to raise rates in the Covid-19 era late in 2021.

“We expect the RBNZ to deliver a 50-basis point hike at next month's meeting, followed by 50 points in October and 25 in November, taking the year-end cash rate to 3.75%,” said analysts at TD Securities.

“We then pencil in another 25-basis point hike to 4% in February 2023, which is where we see the terminal rate.”

TD said the risk to that call was likely for a “slower and lower terminal” than its forecasts.

“Indeed, if the global outlook turns and more signs of demand destruction emerge, removal of the phrase 'least regrets' from today's statement affords the RBNZ the ability to dial down rate hikes from 50-basis points to 25 as early as at next month's meeting.”

Both of the down under dollars were stronger on the greenback, with the Aussie last ahead 0.34% at AUD 1.4746, and the Kiwi advancing 0.13% to NZD 1.6296.

Reporting by Josh White at Sharecast.com.