Asia report: Stocks mixed as Japan posts wide trade deficit

Market participants were digesting Japan’s trade data alongside a downturn in business sentiment among large manufacturers.

“This morning, Asian stock markets are showing a varied performance, with Chinese indices gaining while most others are experiencing declines,” said TickMill market analyst Patrick Munnelly.

“A Chinese media source reported that a key interest rate was kept unchanged this week due to concerns about its impact on the yuan.

“In the meantime, Japan reported a smaller-than-expected trade deficit in January, thanks to strong exports, especially in the automobile sector, and a decrease in imports.”

Mainland Chinese equities lead gains on mixed day for region

In Japan, the Nikkei 225 experienced a slight decline of 0.26%, settling at 38,262.16, while the Topix also saw a marginal decrease of 0.19% to reach 2,627.30.

Among the leading losers on Tokyo’s benchmark were Chiyoda, down 4%; DOWA Holdings, off 3.88%; and Toho Zinc, which finished 3.06% weaker.

Conversely, Chinese markets demonstrated resilience with the Shanghai Composite rising by 0.97% to 2,950.96, and the Shenzhen Component increasing by 0.79% to 8,975.97.

Leading Shanghai’s gains was Henan Huanghe Whirlwind and Hanma Technology Group, up 10.18% and 10.14%, respectively.

Hong Kong’s Hang Seng Index jumped 1.57% to 16,503.10, buoyed by impressive performances from Longfor Properties, up 9.49%; Hang Seng Bank, ahead 9.1%; and Ping An Insurance, which advanced 6.37%.

South Korea's Kospi index experienced a slight downturn of 0.17%, closing at 2,653.31, with notable losses from Doosan Bobcat and KT Corporation of 6.02% and 4.7%, respectively

In Australia, the S&P/ASX 200 faced a decline of 0.66%, settling at 7,608.40, as Corporate Travel Management saw a significant decrease of 20.15%, while Woolworths Group declined 6.61%.

Across the Tasman Sea, New Zealand's S&P/NZX 50 index saw a modest increase of 0.17%, closing at 11,590.47, with positive movements from Investore Property and Tourism Holdings of 3.6% and 2.35%, respectively.

On the currency front, the dollar was last down 0.01% on the yen to trade at JPY 149.99.

The greenback also decreased against the Aussie, by 0.14% to AUD 1.5248, while it retreated 0.39% from the Kiwi to change hands at NZD 1.6159.

In oil markets, both Brent crude and West Texas Intermediate futures experienced slight declines, with the former last down 0.57% on ICE at $81.87 per barrel, and the NYMEX quote for the latter dropping 0.62% to $76.56.

Japanese exports rise as imports decline sharply

In economic news, fresh official data revealed an 11.9% year-on-year increase in Japan's exports for January, surpassing Reuters' estimates of a 9.5% rise.

At the same time, the country experienced a sharper-than-expected decline in imports, falling by 9.6% compared to projections of an 8.4% decrease.

However, despite the positive export figures, Japan posted a significant trade deficit of JPY 1.758trn, in stark contrast to December's surplus of JPY 68.9bn.

“Japanese exports are showing signs of a sustained recovery, although the data in the first quarter will be distorted by Lunar New Year effects and the low base from last year,” said Kelvin Lam, senior China economist at Pantheon Macroeconomics.

“It is encouraging to see a revival in Chinese trades in January, but caution against reading too much into this yet. In any case, we expect the Chinese recovery to be gradual and patchy, resulting in bumpy demand for Japanese goods.

“Elsewhere, the upturn in ICT demand and related AI applications to existing electronics products should help support Japanese exports in the first half.”

Elsewhere, the monthly Reuters Tankan survey showed business sentiment souring in February, with the sentiment index for manufacturers plummeting to -1 from January's +6.

Similarly, the service sector index declined to +26 from +29 in January.

A negative figure in the indices suggested that pessimists outnumbered optimists in the sector, raising fears of further economic weakness in Japan.

The deteriorating business confidence intensified worries about Japan's economic trajectory, particularly following last week's revelation that the economy had slipped into a technical recession.

Reuters noted that "the loss of business confidence raises worries that Japanese firms may become reluctant to boost wages enough to achieve stable and sustainable inflation in a country that has been mired in a deflationary mindset for more than a decade."

Australia, meanwhile, saw a significant uptick in annual pay growth, reaching 4.2%, marking the fastest pace in 15 years, according to data from the Australian Bureau of Statistics Wage Price Index.

The quarterly analysis for the December quarter of 2023 further underscored the growth, with Australian wages growing 0.9%.

Notably, the rise in wages was largely attributed to the education and training sector, as well as the healthcare and social assistance industry, as indicated by government data.

That figure aligned with expectations of analysts polled by Reuters.

The report highlighted that "this quarter saw a significantly higher contribution to growth from the public sector," signifying a broad-based increase in wages across various segments of the economy.

Reporting by Josh White for Sharecast.com.