Asia report: Stocks slide ahead of Jackson Hole, Tokyo inflation rate shrinks

Markets in the Asia-Pacific region recorded significant declines on Friday, as investors reacted to the latest inflation figures from Tokyo, and awaited potential cues on US monetary policy from the Jackson Hole meeting.

Patrick Munnelly, market analyst at TickMill Group, said the downward pressure on Asian equity markets was driven by negative momentum carried over from global markets.

“The Nikkei 225 index experienced a significant decline, dropping below the 32,000 handle and displaying a gap down in its opening,” Munnelly noted.

“This drop was exacerbated by a broad sector-wide recoil, particularly impacting tech stocks.

“Hang Seng, the benchmark index in Hong Kong, recorded a decrease of just over 1%, while the Shanghai Composite also saw a decline of 0.5%.”

Munnelly said that in Hong Kong, companies such as NetEase and Meituan faced notable losses, primarily due to a general sell-off in the technology sector, which overshadowed earnings results.

“Losses were somewhat contained in the mainland Chinese market, partly due to a strong liquidity injection by the People's Bank of China (PBoC).

“Additionally, China's securities regulator engaged with financial industry firms, advocating for longer-term funds to contribute to stabilising the stock market.

“Overall, the decline in Asia-Pacific stocks was driven by the waning Nvidia-driven optimism and the anticipation surrounding Powell's speech.”

Equity markets tumble across the region

In Japan, the Nikkei 225 saw a drop of 2.05% to settle at 31,624.28, while the Topix ended the day down 0.88% at 2,266.40.

Key technology stocks felt the weight on Tokyo’s benchmark, with Advantest plunging 9.99%, Tokyo Electron declining 5.93%, and Dainippon Screen Manufacturing down 3.44%.

In China, the Shanghai Composite fell 0.59% to 3,064.07, while the Shenzhen Component fared worse, dropping 1.23% to 10,130.47.

CCS Supply Chain Management and Beijing Wantai Biological Pharmacy Enterprise both experienced sharp declines in Shanghai, of 10.03% and 10.01%, respectively.

The Hang Seng Index in Hong Kong saw a decrease of 1.4%, concluding at 17,956.38.

Some of the major losers in the index included ENN Energy Holdings, which plummeted 16.2%, NetEase, down 6.74%, and New World Development Co, shedding 5.77%.

South Korea's Kospi wasn't spared, falling 0.73% to 2,519.14, with some of the top decliners including Samsung Engineering and Naver Corporation, which fell 7.92% and 7.86% respectively.

The S&P/ASX 200 in Australia retreated 0.93%, closing at 7,115.20.

Significant contributors to Sydney’s drop included Pilbara Minerals and Tabcorp Holdings, with declines of 8.02% and 7.76% respectively.

New Zealand's market remained relatively resilient in comparison, with the S&P/NZX 50 experiencing a modest fall of 0.3% to 11,467.66.

However, Vista Group International and Pacific Edge recorded significant declines of 8.56% and 4.63%, respectively.

On the currency front, the dollar was last up 0.13% on the yen to trade at JPY 146.02.

The greenback was mixed against the down under dollars, dipping 0.12% on the Aussie to AUD 1.5564, while it strengthened 0.18% against the Kiwi to change hands at NZD 1.6912.

In oil markets, both Brent crude and West Texas Intermediate futures saw gains, with the former last up 1.42% to $84.54 per barrel, and the latter edging up 1.4% to $80.16.

Tokyo's core inflation dips, Malaysia's CPI rate slows, Beijing eases mortgage rules

In economic news, Tokyo reported a decrease in its core inflation rate earlier in the day, with the rate coming in at 2.8% this month, down from July's 3% and falling slightly below the 2.9% forecast by Reuters polling.

It was the most modest growth in Tokyo's core inflation, which omits fresh food prices, since September last year.

Tokyo's overall inflation rate was recorded at 2.9%, a dip from 3.2% in July.

“Overnight inflation data saw the leading Tokyo core CPI reading drop, allaying concerns over the Bank of Japan inflation rise earlier in the week,” said Scope Markets chief market analyst Joshua Mahony.

“That outlier had provided short-term strength for the yen, particularly against European currencies as weak PMI figures tempered hawkish sentiment.

“Weekend comments from Ueda in Wyoming should help clear up the outlook, sparking potential yen volatility at the open on Monday.”

In Malaysia, the inflation trajectory also showed signs of moderation, with the country's consumer price index (CPI) registering a 2% year-on-year increase in July.

The pace was the most subdued since August 2021, and was slightly below the 2.1% pencilled in by economists surveyed by Reuters.

Compared to June's 2.4%, July's CPI was noticeably lower, and it was also the fifth consecutive month that the country’s inflation rate had decelerated.

On a monthly basis, there was a 0.1% decrease in CPI in July, slowing from the 0.2% reduction observed in June.

Over in China, authorities unveiled a strategic manoeuvre aimed at invigorating the residential property market.

Announced late on Friday, the initiative was intended to relax some of the country's rigid mortgage regulations.

Based on information from China's Ministry of Housing and Urban-Rural Development, the People’s Bank of China, and the National Administration of Financial Regulation, local city governments were now empowered to discard rules that had historically penalised individuals with past mortgages.

In many major cities, even if the individuals had repaid their mortgage and currently did not possess any property, they were not recognised as first-time buyers, thus subjecting them to stringent borrowing conditions.

That, according to Bloomberg, often translated to demanding higher down payments from such buyers.

Reporting by Josh White for Sharecast.com.