Asia report: Markets mixed after wave of regional data

The special administrative region’s Hang Seng was propelled by strong gains in the technology sector, as Alibaba jumped.

“Asian markets traded with mixed results, influenced by the performance of Wall Street, corporate earnings, and recent statements from the Bank of Japan,” said TickMill market analyst Patrick Munnelly.

“The Nikkei 225 was under pressure due to rising Japanese bond yields and a more assertive stance from Bank of Japan governor [Kazuo] Ueda.

“The Hang Seng and Shanghai Composite indices also had mixed performance, with Hong Kong outperforming due to support measures from Chinese authorities, while the mainland market was volatile and briefly erased earlier gains after the People's Bank of China continued to reduce liquidity through open market operations, but later recovered slightly.”

Munnelly noted reports that Chinese authorities requested certain hedge funds to limit their short selling activities in the stock index futures market.

“The PBoC will reduce its reserve ratio requirement by 0.5 percentage points starting from 5 February, and will keep using liquidity injection tools.

“PBoC … mentioned that RRR levels are still relatively high and the cut is intended to release CNY 1trn into the economy.”

Hong Kong leads gains on mixed day for region

In Japan, the Nikkei 225 index retreated by 0.8% to close at 36,226.48, while the Topix index slipped by 0.51% to settle at 2,529.22.

Leading the losses on Tokyo’s benchmark was Mitsui Fudosan, down 4.18%, while Mitsui Engineering & Shipbuilding lost 4.04% and Mitsubishi Estate was off 3.84%.

Mainland China markets showed resilience, with the Shanghai Composite index jumping 1.8% to reach 2,820.77, and the Shenzhen Component index increasing 1% to settle at 8,682.19.

Notable gainers in Shanghai included AVIC Capital and China Enterprise, rising 10.14% and 10.13%, respectively.

Hong Kong's Hang Seng Index experienced a substantial uptick, gaining 3.56% to close at 15,899.87.

Leading the charge was ENN Energy, up 9.09%; China Unicom Hong Kong, ahead 8.32%; and Alibaba Group, which closed 7.32% firmer.

In South Korea, the Kospi dipped 0.36% to conclude at 2,469.69, with notable decliners including Hanjinkal and Hanmi Science, which were 4.22% and 4.09% lower, respectively.

The S&P/ASX 200 in Australia registered a marginal increase of 0.06%, closing at 7,519.20.

Iluka Resources added 8.45% and Northern Star Resources advanced 6.04% to top the list in the Sydney market.

New Zealand's S&P/NZX 50 index saw a modest rise of 0.46%, closing at 11,856.61, with Oceania Healthcare and Stride Property leading the gains, rising 4.29% and 3.79%, respectively.

In currency markets, the dollar was last down 0.55% against the yen to trade at JPY 147.54, while it decreased 0.24% on the Aussie to AUD 1.5162.

The greenback was also weaker against the Kiwi, last falling by 0.42% to change hands at NZD 1.6318.

Oil prices showed slight gains, with Brent crude futures last rising 0.19% on ICE to $79.70 per barrel, and the NYMEX quote for West Texas Intermediate increasing 0.3% to $74.59.

Private sector activity expands in Japan, NZ inflation slows

In economic news, Japan's private sector activity in January showed robust expansion, reaching its highest point since September, according to flash data from au Jibun Bank.

The country's composite purchasing managers index (PMI) surged to 51.1, up from December's 50.0.

The upswing was primarily driven by service providers, with the service sector PMI accelerating to 52.7 from 51.5.

Meanwhile, the manufacturing PMI registered a milder contraction at 47.4, improving from December's 46.8.

“Manufacturers remain optimistic about the 12-month outlook, with the expectations index at 60.8, though down 2.6 points from November,” said Duncan Wrigley at Pantheon Macroeconomics.

“Domestic demand is likely to remain relatively sluggish, while export demand should gradually revive thanks to the lagged effect of lower interest rates.”

Wrigley added that Japan’s service sector rebound appeared to be largely confined to tourism, especially on the back of high foreign visitor numbers and spending since the reopening.

“The most recent gauge for real household spending, -2.9% in November, indicates that households are still curbing discretionary expenditure in response to the cost of essentials like food.

“Broad real wage growth is likely to revive only modestly this year, limiting the strength of domestic demand, held down by limited bargaining power for SME workers and people without permanent contracts.”

Japan's exports in December meanwhile experienced a remarkable year-on-year growth of 9.8%, reversing the 0.2% decline seen in the prior month.

The figures exceeded expectations, surpassing the 9.1% projected rise by economists polled by Reuters.

On the import front, there was a 6.8% year-on-year decrease in December, a more moderate contraction compared to November's 11.9% decline but slightly steeper than the 5.3% expected.

As a result, Japan's trade balance for December stood at a surplus of $62.1bn, contrasting with the $780.4bn deficit in November.

For the entirety of 2023, Japan's total exports increased 2.8% year-on-year, while imports declined by 7%.

“Japanese exports appear to have bottomed out, though the data in the first two months of 2024 will be distorted by Chinese New Year effects,” Pantheon’s Duncan Wrigley added.

“The bounce back in shipments to China is particularly encouraging, though the patchy recovery there is likely to result in bumpy demand for Japanese products.

“The IT upcycle, though uneven, should be helpful for Japan’s trade.

In New Zealand, the inflation rate dipped to 4.7% in the final quarter of 2023, marking its lowest level since June 2021.

While it did indicate a slowdown in inflation throughout 2023, it was still above the Reserve Bank of New Zealand's target range of 1% to 3%.

The reading would be the last inflation release before the central bank’s monetary policy decision at the end of February, after it maintained the official cash rate at 5.5% in November.

Across the Tasman Sea, Australia's manufacturing sector showed signs of recovery, expanding for the first time in 11 months.

According to Juno Bank's flash data, the manufacturing PMI for January rose to 50.3, up from December's 47.6.

At the same time, the service sector showed a slower pace of contraction, with the services PMI at 47.9 compared to December's 47.1.

Overall, the composite PMI for business activity in Australia improved to 48.1 from December's 46.9.

Finally on data, China was set to reduce the reserve ratio requirements (RRR) for banks by 50 basis points from 5 February.

The reduction, announced by People's Bank of China governor Pan Gongsheng, would release CNY 1trn in long-term capital, providing banks with increased capacity to extend loans and stimulate spending.

It would be the central bank's first RRR reduction in 2024, following two cuts last year, with indications of further room for monetary policy easing in the future.

Reporting by Josh White for Sharecast.com.