Asia report: Most markets rise as China relaxes some testing rules
Most stock markets in Asia closed higher on Monday, after authorities in China relaxed some of their strict Covid-19 testing rules in a number of cities.
In Japan, the Nikkei 225 was up 0.15% at 27,820.40, as the yen weakened 0.72% against the dollar to last trade at JPY 135.28.
Automation specialist Fanuc was up 2.73%, fashion firm Fast Retailing jumped 3.11%, and technology conglomerate SoftBank Group managed gains of 0.21%.
The broader Topix index was 0.31% weaker by the end of trading in Tokyo, settling at 1,947.90.
On the mainland, the Shanghai Composite was up 1.76% at 3,211.81, and the technology-heavy Shenzhen Component was 0.92% firmer at 11,323.34.
Service sector activity contracted at its fastest pace in six months, according to fresh data out of China, with the Caixin/S&P Global services purchasing managers’ index (PMI) coming in at 46.7 for November,
It made for the third consecutive month of contraction for the dataset, after readings of 48.4 in October and 49.3 in September.
PMI readings above 50 points signal expansion, while those below 50 denote contraction in a sector.
The Caixin reading came after Beijing’s official non-manufacturing PMI came in at its lowest since April last week, at 46.7.
Official PMI readings in China are seen as representative of large, state-affiliated industry in the semi-planned economy, while the Caixin data is more reflective of small-to-medium enterprises.
“We think China is on the path towards gradual easing, but it will be bumpy and uneven, especially if surges threaten to overwhelm hospital capacity in some regions,” said Duncan Wrigley at Pantheon Macroeconomics.
“Firms responding to the PMI were divided between some evincing optimism for a strong post-pandemic recovery, while others were concerned about how long it would take to control the virus.
“Service sector conditions are likely to get worse before they get better, but overall we do expect meaningful progress in 2023.”
South Korea’s Kospi slipped 0.62% to 2,419.32, while the Hang Seng Index in Hong Kong rocketed 4.51% to 19,518.29.
Technology and travel-related stocks were in the green in the special administrative region, after Chinese authorities eased some Covid-19 testing rules.
Alibaba Group was up 9.26%, Li Auto added 12.21%, Nio surged 14.9%, Tencent was ahead 6.08%, and Xiaomi was 13.64% stronger.
Gambling plays were in the green as well, with Galaxy Entertainment up 6.09%, MGM China rocketing 20.23%, Sands China ahead 13.82%, SJM 7.11% firmer, and Wynn Macau 15.59% higher.
Seoul’s blue-chip technology stocks were on the back foot, with Samsung Electronics down 0.17% and SK Hynix losing 1.1%.
“Further indications of curbing of Covid restriction policies in China supported Asian equity markets overnight, with the Hang Seng surging 9%; the Chinese yuan was also a stand-out performer pressuring the Dollar to print two-and-a-half-month highs,” said TickMill Group market analyst Patrick Munnelly of the situation on Monday.
“For the week ahead markets will continue to eye the China headlines for further signs of an easing in restrictions, while on the data front we have a relatively quiet slate, highlights include US ISM services and European retail sales released today, central bank meetings for Canada and Australia, with both monetary policymakers set to raise rates again, for the remainder of the week markets will eye US producer price inflation data released Friday, ahead of next week's all-important CPI release.
“FOMC policymakers will monitor this data for further indication of moderation in goods and services inflation.”
Munnelly noted that US GDP data was expected to remain positive in the fourth quarter, with the ISM release later set to confirm that view, while other US data on tap this week included the trade balance and Friday’s consumer sentiment.
“In the eurozone, third quarter GDP out Wednesday is expected to come in at 0.2% quarter-over-quarter, retail sales and German factory orders are expected to remain impacted by energy prices in the region.
“In the UK focus will be on survey data with today's services PMI is expected to confirm the 'flash' estimate with a second consecutive month of contraction.
“The BRC will release its 'unofficial' figures for November, which will give the first signs of consumer appetite as we head into the festive shopping period.”
Oil prices were higher at the end of the Asian day, with Brent crude futures last up 2.7% on ICE at $87.898 per barrel, and the NYMEX quote for West Texas Intermediate rising 2.69% to $82.13.
In Australia, the S&P/ASX 200 added 0.33% to 7,325.60, as investors closed their wallets ahead of the Reserve Bank of Australia’s next interest rate decision on Tuesday.
Economists polled by Reuters had pencilled in a 25-basis point hike, which would make for the eighth rise in the cash rate this year, and the third consecutive hike of such a quantum since October.
Across the Tasman Sea, New Zealand’s S&P/NZX 50 rose 0.31% to 11,677.75, with specialist dairy producer Synlait Milk among the big risers, closing up 6.92%.
Both of the down under dollars were stronger on the greenback, with the Aussie last ahead 0.22% at AUD 1.4694, and the Kiwi advancing 0.12% to NZD 1.5604.
Reporting by Josh White for Sharecast.com.