Asia: Japanese stocks drops to seven-month low, as Chinese markets halt slump
Asian equities markets endured a mixed day on Tuesday, with Chinese stocks edging higher, while their Japanese counterparts fell heavily.
Japanese stocks slumped to a seven-month low, as the Nikkei Stock Average relinquished its gains for the year after declining 2.43% on the day, bringing its monthly decline to approximately 8% - the worst performing major stock index in the region.
The drop in Japanese equities came as the yen continued to strengthen against the US dollar, gaining 0.67% on Tuesday and putting pressure on Japanese exporters, which rely on a weaker yen to improve margins.
Chemical and cosmetics firm Kao Corp. fell 4.2% and retail-store operator Seven & I Holdings, which dropped 4.1%, were among the Japanese stocks hit by a decline in foreign demand.
The currency has gained approximately 4% over the last quarter and analysts have suggested it has become a safer bet than the dollar, which has stalled over the last couple of months.
"As a funding currency, the yen will be prone to bouts of strength during periods of risk-off, so in some ways this reflects a more sombre outlook from our analysts about the prospects for global growth," analysts at Deutsche Bank said in a note.
"We'd have thought that [Japan's prime minister Shinizo] Abe's declining approval rating increases the chance of further action from the Bank of Japan, but expectations for further stimulus appear to be on the wane."
Chinese data paints a mixed picture
There was better news in China, however, where the Shanghai Composite reversed earlier losses to close up 2.92%, while Hong Kong's Hang Seng climbed 3.28%.
Trade data from China painted a mixed picture, with exports shrinking for the second month but not by as much as feared.
The country's exports declined by 5.5% in dollar terms compared to the same month last year, better than consensus for a 6.6% fall and further decelerating following a decrease of 8.3% in July.
Imports from abroad were much weaker, with purchases decreasing at a significant 13.8% year-on-year rate in dollar terms, far exceeding the 7.9% consensus and the fall of 8.1% in July, casting some further doubt on domestic demand.
This left the trade balance surging to a $60.24bn surplus, larger than the $48bn estimated and the previous $43.0bn.
"It appears that, for all the statements and reports to the contrary, the Chinese government is going to continue to get its select band of market warriors to buoy the index and keep up the artifice of a healthy stock market," said Spreadex's financial analyst Connor Campbell.
Elsewhere, Australia's ASX 200 climbed 1.69%, while South Korea's Kospi declined 0.24%.
Emerging market currencies remained under pressure, with the Malaysian ringgit and the Indonesian rupiah both hitting new 17-year-lows against the dollar, while South Korea's won fell to its lowest level since July 2010.