Asia report: Markets mixed as China's industrial profits rise

27th Mar 2024 10:14

(Sharecast News) - Asia-Pacific markets experienced mixed outcomes on Wednesday, as investors weighed in on recent economic data from China and Australia and reacted to significant currency movements.

The Japanese yen was in focus as it weakened to its lowest level in 34 years against the dollar, following the Bank of Japan's ending of its negative interest rate policy last week.

"Most Asian stock markets are trading lower due to negative cues from Wall Street and cautiousness among traders," said TickMill market analyst Patrick Munnelly.

"They are also awaiting key US and European inflation readings and comments from central bank officials for insight into the interest rate outlook.

"Meanwhile, concerns are also rising about the economic impact of the indefinite suspension of vessel traffic at the Port of Baltimore, following a cargo ship's collision with the Francis Scott Key Bridge, resulting in its collapse."

Munnelly noted that the Japanese equity market was showing significant gains, recovering from losses in the last two sessions, despite the negative signals from Wall Street.

"The Nikkei 225 is currently above the 40,700 handle, with most sectors experiencing gains, particularly in the exporter and financial sectors.

"Stocks dropped in China and Hong Kong, primarily due to the decline in technology companies.

"The decrease was influenced by the drop in Nvidia's shares and Alibaba's announcement of postponing the IPO of its logistics subsidiary, impacting the morale of AI-related firms in the region."

Markets in mixed state amid economic updates

In Japan, the Nikkei 225 index rose 0.9% to reach 40,762.73, and the Topix index increased 0.66% to 2,799.28.

Leading the gains on Tokyo's benchmark were Sumitomo Realty & Development, up 5.24%, Tokyo Tatemono, rising by 4.8%, and Suzuki Motor, which advanced by 4.66%.

Conversely, China's markets faced downward pressure, with the Shanghai Composite declining 1.26% to 2,993.14 and the Shenzhen Component dropping 2.4% to 9,222.47.

Notable declines were seen in Shanghai in shares of Eastern Pioneer Driving School and EmbedWay Technologies Shanghai, each plummeting by just over 10%.

Hong Kong's Hang Seng Index also fell, losing 1.36% to close at 16,392.84, driven by significant losses in stocks such as China Mengniu Dairy, Citic Pacific, and BYD Co.

In contrast, Australia's S&P/ASX 200 index bucked the trend, rising by 0.51% to 7,819.60.

Energy and resource companies, including Meridian Energy and Emerald Resources, led the gains in Sydney.

Elsewhere in the region, South Korea's Kospi marginally declined by 0.07% to 2,755.11, and New Zealand's S&P/NZX 50 index decreased by 0.18% to 12,010.66.

Currency markets saw the dollar last trade 0.27% lower on the yen at JPY 151.15, while it gained 0.1% against the Aussie to AUD 1.5322 and remained stable on the Kiwi, changing hands at NZD 1.6655.

In the commodities sector, Brent crude futures were last down 0.77% on ICE at $85.59, and the NYMEX quote for West Texas Intermediate lost 0.75% to $81.01.

Industrial profits rise in China, Australian inflation stable

In economic news, China reported an uptick in industrial profits for the first two months of the year, with a 10.2% increase compared to the same period last year, according to the National Bureau of Statistics (NBS).

That growth was uneven across different sectors - state-owned enterprises saw a modest 0.5% increase, while foreign companies, including those from Hong Kong, Macau, and Taiwan, experienced a substantial 31.2% surge in profits.

The private sector also showed robust performance, with a 12.7% year-on-year rise in profits.

Despite the positive early figures, the industrial profit for the entirety of last year fell by 2.3%.

In Australia, the consumer price index (CPI) maintained a 3.4% annual increase in February, consistent over the last three months, according to the Australian Bureau of Statistics.

That rate marked a two-year low in inflation levels.

Notably, holiday travel and accommodation costs decreased by 1.3%, attributed to a post-holiday period reduction in domestic travel and accommodation demand, despite spikes in certain areas due to events like Taylor Swift concerts.

Meanwhile, in Japan, focus was on the Bank of Japan's (BoJ) monetary policy direction, with board member Naoki Tamura emphasising the need for a gradual approach towards normalising the bank's expansive monetary stance.

According to Reuters, Tamura said the bank should aim for a flexible interest rate policy that could adapt to economic and price changes.

The statement followed the BoJ's recent decision to end its eight-year negative interest rate policy and to discontinue yield curve control, marking significant shifts in its monetary policy framework.

Reporting by Josh White for Sharecast.com.