Asia Pacific share market kicked off the month on a positive note, Monday, 01 August 2016, as investors digested the latest gauges of regional manufacturing activity.
Factories in China and Japan - the world's second and third largest economies - saw scant sign of demand recovering in July, with surveys across Asia offering only crumbs of comfort after weak growth readings in the United States and Europe.
The fitful global performance was clearly on the mind of William Dudley, a top policy maker at the Federal Reserve, who used a speech in Indonesia to urge caution on raising U.S. interest rates. Dudley, a close ally of Fed Chair Janet Yellen, warned of negative shocks due to the unknown fallout from Britain's vote to leave the European Union, a strong dollar, and because it was safer to delay a move with interest rates so low.
Among the slew of surveys out on Monday, China's official Purchasing Managers' Index (PMI) slipped a tick to 49.9 in July, inching below the 50 mark that is supposed to separate growth from contraction. There was better news from the private Caixin version of the PMI, which covers a greater share of smaller firms, where the index picked up to 50.6 in July, from 48.6 in June. That was the first expansion 17 months.
Also promising was China's huge services sector, where the official measure showed a slight pick up in activity in July. Beijing is counting on a transformational shift to services to make up for persistent woes in manufacturing.
The cheer did not extend to Japan where a painfully high yen led new export orders to shrink at the fastest pace in more than 3-1/2 years, according to IHS Markit/Nikkei. While the overall PMI nudged up to 49.3 in July, from 48.1 in June, it remained in contractionary territory.
Weak domestic demand had a deadening effect in South Korea, where the Nikkei/Markit PMI fell to 50.1 in July, from 50.5. Official trade figures also showed exports from the electronics powerhouse fell for the 19th straight month in July, and fell at the fastest annual rate in three months.
One bright spot was India where factory activity hit a four-month high of 51.8 in July, buoyed by firmer demand at home and abroad.
The U.S. eked out an annualised rise of just 1.2 percent in gross domestic product (GDP) over the second quarter, a major miss to forecasts that led investors to further lengthen the odds on a rate hike this year.
Among Asian bourses
Japan Market recovers ground
The Japan share market closed higher after recovering early losses, as investors digested the Bank of Japan's effort on Friday to stimulate the economy. The BoJ on Friday said it would boost the size of its ETF purchase programme to 6.6 trillion yen from 3.3 trillion yen previously, a move that disappointed investors in currency and fixed income markets. But it also said it would conduct a comprehensive assessment of monetary policy at its September meeting, which has prompted market experts to speculate the central bank might ditch the reference to the two-year time frame for achieving their inflation target. Gainers were led by precision instrument, pharmaceutical and banking shares while brokerage, airline and marine transport issues succumbed to selling. The 225-issue Nikkei Stock Average rose 66.50 points, or 0.4%, to 16635.77. The broader Topix ndex of all First Section issues on the Tokyo Stock Exchange finished 0.91 points, or 0.07%, down at 1,321.83.
Shares of financial companies have been buoyant after the Bank of Japan refrained on Friday from charging more interest to institutions for parking their excess reserves at the central bank. As part of its monetary easing the BOJ did opt to increase the amount of exchange-traded funds (ETFs), which has helped underpin the broader equity market.
NEC Corp. sank 11% after the computer company posted about 30 billion yen in operating losses for the quarter ended June on lack of growth in developing markets and the domestic economy.
Sony Corp. rose 1.7% after the electronics manufacturer surprised analysts by posting a profit of 21.2 billion yen last quarter. Analysts had expected a 39-billion yen loss.
Panasonic Corp. declined 7% as traders reacted to its first quarter earnings for fiscal 2017, released on Friday. Panasonic's operating profit for the quarter was at 66.9 billion yen ($650 million), compared with 76.6 billion yen registered a year earlier.
Australia Market kicks off the month on a positive note
Australian share market kicked off the month on a positive note, with energy, materials, property trusts, financials, and realty stocks leading rally. The lift came ahead of Tuesday's Reserve Bank of Australia meeting, where most of economists expect a 25 basis point cut to 1.5%. At close of trade, the benchmark S&P/ASX 200 index inclined 25 points, or 0.45%, to 5587.40. The broader All Ordinaries gained 26.10 points, or 0.46%, to 5670.10.
Energy and materials were the strongest sectors, up 2.7% and 0.9% respectively. Rio Tinto and BHP Billiton rose 0.3% to A$49.70 and 0.8% to A$19.67, respectively. Fortescue Metals shares were up 0.8% to A$4.47. Gold miner Newcrest Mining climbed 1.3% to A$25.33 as the price of gold lifted on US dollar weakness in the wake of Friday's weak US GDP figures. Whitehaven Coal continued its strong run, up 8.3% to A$1.825. Woodside Petroleum added 1.9% to A$27.04 and Origin Energy climbed 3.6% to A$5.70.
The banks had a mixed day. National Australia Bank rose 0.6% to A$26.70 and Commonwealth Bank of Australia added 0.8% to A$77.98. Westpac Banking Corp advanced 0.03% to A$31.10. ANZ Banking Group declined 0.2% to A$25.78.
Iluka Resources shares climbed 1.3% after returning from a trading halt on Monday following Friday evening's news that the mineral sands explorer made an all-cash, $284 million bid for London-listed rival Sierra Rutile. The company said the deal, if successful, would be earnings-per-share accretive in the coming financial year.
China Stocks drop 1.9%
Mainland China stock market slipped to a near one-month low after official data indicating slowdown in manufacturing activity among large enterprises. Investor sentiment was also hit by regulators' crackdown speculation as well as a fresh wave of initial public offerings (IPOs). The CSI300 index of the largest listed companies in Shanghai and Shenzhen lost 0.85%, to 3176.81, while the Shanghai Composite Index declined 0.87%, to 2953.39 points.
CHINA'S official factory gauge fell below the dividing line between improvement and deterioration due to heavy flooding, while private manufacturers posted their first activity expansion in 17 months, data showed today. Manufacturing purchasing manager's index fell to 49.9 last month, below June's 50, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing. Factory output fell to 52.1 in July from 52.5 in June, and total new orders hovered just inside expansionary territory at 50.4, slightly down from June's 50.5, the PMI showed. Meanwhile, the Caixin China General Manufacturing PMI, which reflects private and export-oriented manufacturing conditions, came in at 50.6. It posted better than expected performance and was up significantly by 2 points from its June reading. This was the first expansion in activities since February 2015, with sub-indexes of output, new orders and inventory all surging past the 50-point mark that separates growth from decline.
China's securities watchdog has recently tightened rules over hedge funds, limited shadow banking business of mutual fund houses and is drafting rules aimed at curbing money flows from banks into the stock market through wealth management products. In addition, the stock exchanges have stepped up a crackdown on speculative trading. Traders also attributed Monday's market weakness to a flood of nine IPOs this week, including relatively big share sales by Jiangsu Jiangyin Rural Commercial Bank Co and Bank of Guiyang Co.
Hong Kong Stocks end 1.1% higher
The Hong Kong stock market kicked off the month on a positive note after data this morning painted a somewhat encouraging picture of the Chinese economy. The official gauge of manufacturing activity slipped into contractionary territory in July, to a reading of 49.9 from 50 in June, the level that separates expansion from contraction, while the reading on the services sector improved to 53.9 last month. There was an even better reading from the privately-prepared Caixin-Markit PMI gauge for manufacturing, which jumped to 50.6 in July from 48.6, comfortably beating expectations. The benchmark Hang Seng Index advanced 237.77 points, or 1.09%, to 22129.14 points. The Hang Seng China Enterprises Index, benchmark measure of performance of mainland China enterprises, grew 170.23 points, or 1.9%, to 9129.20. Market turnover decreased to HK$63.4 billion from HK$68 billion on Friday.
China's new loan increased by RMB7.53 trillion in 1H, but analysts expect July's loan growth may drop to RMB700 billion. CCB (00939) jumped 3% to HK$5.35 as the bank is preparing for pilot testing of NPLs securitisations. CM Bank (03968) and BOC (03988) gained 2% and 3% to HK$17.08 and HK$3.26.
China Life (02628) added 1% to HK$17.78 even though it reported a 70% decline of interim earnings. China Taiping (00966) and CPIC (02601) issued profit warnings. But both stocks gained 1% to HK$15.38 and HK$27.6.
CLP Holdings (00002) put on 1% to HK$82. The power company said its interim earnings grew 7% to HK$6.12 billion. Power Assets (00006) shot up 3% to HK$77.9.
Macau government announced that July's GGR decreased 4.5% (market expectation of 5.5% (decline) to MOP17.8 billion. Sands China (01088) gained 2% to HK$30.05. Galaxy Entertainment (00027) added 1% to HK$25.95. Wynn Macau (01128) slid 3% to HK$12.24 after Nomura Research and Credit Suisse lowered their target prices and ratings for the casino operator.
Sensex hits lowest closing level in almost a week
Key benchmark indices registered small losses in a volatile trading session as investors maintained caution ahead of the possible discussion on the Goods and Services Tax (GST) bill in Rajya Sabha this week. The barometer index, the S&P BSE Sensex lost 48.74 points or 0.17% to settle at 28,003.12. he Nifty dropped 1.95 points or 0.02% to settle at 8,636.55.
Stocks of public sector banks declined. Stocks of private sector banks were mixed. Capital goods stocks were mixed. ICICI Bank edged lower after the bank reported weak Q1 June 2016 results. L&T dropped in volatile trade after the company announced strong Q1 earnings. Maruti Suzuki India rose after the company reported 12.7% growth in total sales in July 2016. Mahindra & Mahindra edged higher after the company reported 14% growth each in its total tractor sales and total automobile sales in July 2016. Shares of Advanced Enzyme Technologies (AETL) witnessed strong debut on the bourses.
Elsewhere in the Asia Pacific region: New Zealand's NZX50 added 0.1% to 7356.63. South Korea's KOSPI index rose 0.67% to 2029.61. Taiwan's Taiex index grew 1.07% to 9080.71. Malaysia's KLCI was up 0.72% to 1665.23. Indonesia's Jakarta Composite index added 2.79% to 5361.58. Singapore's Straits Times index rose 0.83% to 2892.52.
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