Asia report: Stocks slip as investors pare risk exposure

Stock markets in the Asia-Pacific region closed mostly lower on Friday, after a week that saw investors shifting their attention to interest rate hikes from recent liquidity concerns in the banking sector.

Both the US Federal Reserve and the Bank of England tacked a quarter-point onto their interest rates this week, after the European Central Bank added 50-basis points to its key rate last Thursday.

“Asian equities retreated as investors paired risk exposure into the weekend, in line with Wall Street,” said TickMill market analyst Patrick Munnelly.

“Investors have been buffeted by a round of mixed signals from Treasury secretary [Janet] Yellen, who remained non-committal regarding deposit backstopping, hinting that such a move remained on the table.”

That, Munnelly quipped, left investors “in a dilemma” between the widely-viewed dovish hike by the Fed, and ongoing banking liquidity concerns.

“Considering another weekend of uncertainty, it seems investors would rather wait for some clarity before deploying risk capital.”

Most bourses slide as Block tumbles in Sydney

In Japan, the Nikkei 225 index closed down 0.13% at 27,385.25, while the Topix index fell 0.1% to 1,955.32.

Among the biggest decliners on Tokyo’s benchmark were Hitachi Zosen Corporation, which dropped by 4.15%, DOWA Holdings, down by 2.92%, and Terumo Corporation, which fell by 2.79%.

In China, the Shanghai Composite index dropped by 0.64% to 3,265.65, while the Shenzhen Component rose slightly by 0.25% to 11,634.22.

Stocks that saw significant losses in Shanghai included China Satellite Communications, down by 9.27%, and Gree Real Estate, which fell by 6.48%.

The Hang Seng Index in Hong Kong closed down by 0.67% at 19,915.68, with notable decliners including Country Garden Services, which fell by 4.87%, China Resources Mixc Lifestyle, which dropped by 4.25%, and SMIC, which fell by 3.96%.

In South Korea, the Kospi index closed down by 0.39% at 2,414.96, with KB Financial Group down by 3.88% and Hana Financial down by 3.81%.

The S&P/ASX 200 index in Australia closed down by 0.19% at 6,955.20, with Block seeing the biggest decline of 18.4% and Brickworks down by 4.59%.

Block’s plunge came after Hindenburg Research announced a short position on the payments company.

The short-seller alleged that Block was allowing criminal activity to operate with minimal controls, as well as exaggerated the user base of Cash App.

In response, Block said it was planning to work with regulators and look at its legal options against Hindenburg for "factually inaccurate and misleading" claims.

In New Zealand, the S&P/NZX 50 index closed down by 0.12% at 11,580.81, with Eroad down by 5.13% and Pacific Edge down by 4.65%.

On the currency front, the yen was 0.57% stronger on the dollar to last trade at JPY 130.11.

The down under dollars were both weaker against the greenback, however, with the Aussie last off 0.71% at AUD 1.5068, and the Kiwi retreating 0.73% to change hands at NZD 1.6117.

Oil prices also fell, with Brent crude futures last down 3.68% on ICE at $73.10 per barrel, and the NYMEX quote for West Texas Intermediate off 3.9% at $67.23.

Core inflation softens in Japan as factory activity expands

On the economic front, Japan's core inflation rate declined from its peak of 4.2% in January to 3.1% year-on-year in February, in line with expectations.

The country's national inflation also fell to 3.3% in February, down from 4.3% in January.

However, the consumer price index excluding fresh food and energy rose 3.5% in February compared to the same period last year.

“Japan’s inflation remains cost push, imported and is likely to gradually slow as a result of a steadier currency since November and reduced international energy inflation,” said Duncan Wrigley at Pantheon Macroeconomics.

“The domestic economy is unlikely to enter into a self-sustaining recovery while global conditions are so lacklustre.

“We think [Bank of Japan governor] Ueda will explore ways of adjusting the yield curve control policy to make it more sustainable, but he is likely to retain the view that Japan’s economy still needs easy monetary policy for the rest of this year.”

Meanwhile, Japan's factory activity increased slightly in March, with the purchasing managers' index rising to 48.6 from 47.7 in February, still indicating contraction for the fifth consecutive month.

However, the services sector showed a stronger reading of 54.2 in March, compared to 54.0 in February.

“We think the BoJ will be looking for a sustained run of above-50 employment readings as well as signs of broad wage growth, to provide evidence of domestic recovery,” Duncan Wrigley at Pantheon added.

“Economic conditions remain shaky for Japan.

“The services sector strength is likely narrowly based on tourism, while manufacturing activity probably will continue to be dragged down by the soft global economy, compounded by international banking sector issues.”

Australia's services and factory activity fell into contraction territory in March, meanwhile, according to estimates from Juno Bank.

The bank reported a manufacturing PMI of 48.7 and a services PMI of 48.2 in March, down from 50.5 and 50.7 in February, respectively.

Juno Bank cited weaker demand due to higher interest rates, inflation, and softer economic conditions, which affected new business for Australian goods and services.

In regulatory headlines, Hong Kong Exchanges and Clearing announced relaxed listing rules for "specialist tech firms," including a lower requirement for research and development spend.

The minimum market capitalisation for such stocks would be HKD 6bn - lower than the originally-proposed of HKD 8bn - while the threshold for pre-commercial companies was also lowered from HKD 15bn to HKD 10bn.

HKEX said the new rules would be implemented on 31 March.

Reporting by Josh White for Sharecast.com.