Asia report: China surges, Japan sinks on wildly mixed day for markets

Patrick Munnelly at TickMill said the surge in Chinese and Hong Kong stocks came as Beijing took steps to address the country's housing market.

“Monday's trading on the Japanese stock market is drastically down, giving up all of the gains from the previous two sessions,” he said.

“With the markets pricing in the possibility of increased interest rates under new prime minister Shigeru Ishiba, the benchmark fell more than 4% to below the 38,000 handle.”

Munnelly said that since he had consistently criticised the “ultra-accommodative” policies of the Bank of Japan, investors believed he would not stand in the way of policy normalisation.

“But being in a position of leadership can change perceptions, and on the weekend he sounded more accommodating, saying that flexible policy is required given the status of the economy.”

Markets surge in China, sink in Japan

Mainland Chinese stocks had their best day since 2008, with the Shanghai Composite jumping 8.06% to 3,336.50, and the Shenzhen Component surging 10.67% to 10,529.76.

Monday also marked a nine-day winning streak for the CSI 300, buoyed by a strong rally in healthcare and tech stocks like Raytron Technology, which soared nearly 20%.

The sharp gains came amid optimism surrounding government stimulus measures, as well as the fact Monday was the only trading day of the week ahead of the Golden Week holiday.

Meanwhile, Japan’s Nikkei 225 dropped 4.8% to 37,919.55, reflecting investor concerns following last week’s ruling party election and ongoing economic uncertainty.

Major Japanese stocks, including Isetan Mitsukoshi and Lasertec, saw double-digit losses.

Hong Kong’s Hang Seng Index performed positively, rising 2.43% to 21,133.68, driven by significant gains in Alibaba Health Information Technology, which surged nearly 30%, and Zhongsheng Group Holdings, up 15%.

South Korea’s Kospi 100 fell 2.67% to 2,596.34, pressured by declines in companies like Kumyang and Hanjinkal, which dropped over 6%.

Australia’s S&P/ASX 200 managed a modest gain of 0.7% to 8,269.80, led by strong performances from companies like Summerset Group and Fletcher Building.

In contrast, New Zealand’s S&P/NZX 50 dipped 0.27% to 12,423.82, weighed down by losses in Vista Group International and KMD Brands.

In commodities, Brent crude futures were last up 0.43% on ICE to $72.29 per barrel, while the NYMEX quote for West Texas Intermediate added 0.26% to $68.36.

Chinese manufacturing struggles, industrial production drops in Japan

In economic news, China's manufacturing sector continued to struggle in September, with official data showing a fifth consecutive month of contraction.

The official purchasing managers’ index (PMI) came in at 49.8, slightly higher than economists' expectations of 49.5, but still below the 50-point threshold that separates growth from contraction.

A private survey by Caixin, compiled by S&P Global, reported an even weaker result, with the PMI falling to 49.3, marking the steepest decline in 14 months.

That was significantly lower than the 50.5 expected, highlighting ongoing challenges for the sector.

In Japan, industrial production dropped sharply in August, declining 4.9% year on year, a significant increase from the previous month’s 0.4% fall.

On a monthly basis, production fell by 3.3%, exceeding the 0.9% decline forecasted by economists.

That came after a strong 3.1% rise in July, underlining the volatility in Japan's manufacturing sector.

However, Japan's retail sales offered a more positive outlook, rising 2.8% year on year in August, beating expectations of a 2.3% increase.

That marked a slight improvement from the revised 2.7% growth in July, indicating resilient consumer demand despite broader economic challenges.

Japanese markets were also adjusting to political changes, following Shigeru Ishiba's victory in the ruling Liberal Democratic Party elections, positioning him to succeed Fumio Kishida as Japan's next prime minister.

Reporting by Josh White for Sharecast.com.