Asia report: Markets fall as China industrial profits soar

In Japan, the Nikkei 225 was down 0.03% at 29,098.24, as the yen strengthened 0.48% against the dollar to last trade at JPY 113.61.

Uniqlo owner Fast Retailing rose 1.85%, while among the benchmark’s other major components, robotics specialist Fanuc was down 0.81% and technology giant SoftBank Group was off 3.37%.

The broader Topix index was off 0.23% by the end of trading in Tokyo, closing at 2,013.81.

On the mainland, the Shanghai Composite was 0.98% weaker at 3,562.31, and the smaller, technology-heavy Shenzhen Composite lost 1.11% ti 2,397.51.

Fresh data from the National Bureau of Statistics showed industrial profits in China rocketing 16.3% higher year-on-year in September.

“We had anticipated a sharp deceleration given the widespread factory shutdowns which began mid-month, perhaps with some pockets of outperformance as sub-sectors cashed in on the energy crisis,” said Pantheon Macroeconomics chief China economist Craig Botham.

“Industrial production, which typically offers a good lead for profits, had already slowed markedly in September to 3.1% year-on-year, from 5.3%.”

Botham said Pantheon’s forecasts had been “partly right”, with coal profits skyrocketing by 343.3% year-on-year in September from an “already remarkable” 235% in August, while most other industries saw a slowdown in profits, or even an outright decline.

“The big surprise came from jumps in profits for manufacturers of special purpose machinery and electronic equipment - the latter saw profits grow 62.6% after falling 10.4% in August,” he noted.

“We suspect therefore that the surprise in profits is linked to the same source as the surprise in exports; the reopening of Ningbo-Zhoushan port in September after its closure for Covid reasons in August, allowing a catch-up on export orders.”

Craig Botham said he still expected profitability to come under pressure, with data for October set to give a clearer picture.

“Not only will the one-off impact of port reopening largely be finished, but we will start to see higher energy costs passed on.

“Coal profits will likely remain healthy, but recent policy measures to cap coal prices will curb future gains.”

South Korea’s Kospi was off 0.77% to 3,025.49, while the Hang Seng Index in Hong Kong was 1.57% lower at 25,628.74.

Technology stocks were the big losers in the special administrative region, with Alibaba down 2.95%, Meituan losing 5.09%, and Tencent 2.99% lower.

The blue-chip tech plays were also on the back foot in Seoul, with Samsung Electronics down 1.41% and SK Hynix behind by 0.49%.

Oil prices were lower at the end of the Asian day, with Brent crude last down 1.32% at $85.26 and West Texas Intermediate 1.68% lower at $83.23.

In Australia, the S&P/ASX 200 was the region’s odd one out, managing gains of 0.07% to 7,448.70, as investors sifted through the latest inflation data in the sunburnt country.

According to the Australian Bureau of Statistics, consumer prices were up 0.8% in the September quarter, which was in line with what analysts had pencilled in, according to a Reuters poll.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 was down 0.42% at 13,020.26, led lower by specialist dairy exporter A2 Milk, which plunged 11.4%

That came after the company, which primarily exports infant formula to China, indicated that it would need to see a “higher-than-expected market recovery” to achieve its target margins.

It also revealed to shareholders that the ‘daigou’ sales channel had shrunk to just 10% of its business in the wake of the Covid-19 pandemic.

‘Daigou’ refers to members of the Chinese diaspora buying sought-after consumer goods, including infant formula, at retail in another country to export to China, and is a highly controversial practice in the exporting countries, but a profitable sales channel for the makers of in-demand products.

Both of the down under dollars were weaker against the greenback, with the Aussie last off 0.04% at AUD 1.3337, and the Kiwi retreating 0.31% to NZD 1.4005.