Asia report: Markets mixed after slew of economic data

Stock markets in the Asia-Pacific region were mixed on Wednesday, as investors reacted to China's fresh data showing the highest level of factory activity in 11 years.

Japan's Nikkei 225 increased by 0.26% to close at 27,516.33, while the Topix also rose by 0.23% to 1,997.81.

Ajinomoto and Pacific Metals saw significant gains, rising by 9.31% and 5.4%, respectively, while Hitachi Construction Machinery also closed higher, up by 4.43%.

China's Shanghai Composite and Shenzhen Component both increased, rising by 1% to 3,312.35 and 1.11% to 1,914.32, respectively.

China United Network Communications and ARTS Group also saw significant gains, rising by 10.04% and 9.99%, respectively.

Hong Kong's Hang Seng Index was the region's top performer, gaining 4.21% to close at 20,619.71.

Longfor Properties, Country Garden Services, and Sunny Optical Technology were among the index's top performers, rising by 9.6%, 8.94%, and 8.93%, respectively.

South Korea's markets were closed for Independent Movement Day, while Australia's S&P/ASX 200 index closed down by 0.09% at 7,251.60.

Polynovo and Lifestyle Communities were among the biggest losers, down by 5.29% and 4.94%, respectively.

New Zealand's S&P/NZX 50 index also closed down by 0.15% at 11,876.35, with Eroad and SkyCity Entertainment among the biggest losers, down by 3.8% and 2.69%, respectively.

In currencies, the yen strengthened 0.59% on the dollar to last trade at JPY 135.37, while the Aussie advanced 0.67% against the greenback to AUD 1.4761.

The Kiwi also made gains on its US counterpart, of 1.29% to change hands at NZD 1.5960.

In oil markets, Brent crude futures last dropped 0.67% on ICE to $82.89 per barrel, while the NYMEX quote for West Texas Intermediate fell 0.96% to $76.31.

“Overnight data from China confirmed the re-opening narrative is alive and well, with Chinese PMI’s registering the largest expansion in over a decade,” said Patrick Munnelly at TickMill Group.

“Chineses equities surged, with the growth sensitive Hang Seng in the green by almost 5%.”

Munnelly noted, however, that the robust data out of China was countered by less favourable data from Australia, with “soggy growth” and CPI releases weighing on the country’s main board.

“The upbeat Asian session has seen US equity futures reverse the final day of February’s declines, with European bourses also set to open the new month on a positive footing.”

On the data front, According to China's National Bureau of Statistics, the country's official manufacturing purchasing managers' index (PMI) rose to 52.6 in February, surpassing the 50-point threshold that separates growth from contraction.

That was an increase from January's reading of 50.1, and exceeded economists' expectations of 50.5.

The non-manufacturing PMI also rose to 56.3, the highest level since June 2022, up from January's reading of 54.4.

“China’s economic reopening is coming back to life with relatively little policy support, so far,” said Duncan Wrigley at Pantheon Macroeconomics.

“The strength in new export orders is particularly surprising, suggesting a soft landing for demand in key markets.

“As a result, the new premier is likely to announce a moderate policy support package for consumption, private investment and the property sector at the National People’s Congress, which opens on 5 March.”

Meanwhile, Japan's factory activity slowed in February, with the manufacturing PMI falling to 47.7 - the fastest pace of contraction in two and a half years, according to a private survey by au Jibun Bank.

That marked the fourth consecutive month that Japan's factory activity had remained in contraction territory.

“Japanese manufacturers are optimistic, with the future output index barely changed at 60.2, though it has been around 60 since much of the pandemic period,” Pantheon’s Duncan Wrigley added.

“The surprisingly strong Chinese PMIs are a reason for optimism, despite falling new export orders.

“The Korean export data also provide early indications of a soft landing for global demand.”

Indeed, South Korea's trade deficit narrowed to $5.3bn in February, down from $12.65bnin January, according to preliminary data.

That was better than the $6.06bn deficit pencilled in by economists, as exports fell by 7.5%, and imports grew by 3.6%.

“Korean exports should benefit from China’s reopening and resilient demand in key markets like the US and the EU,” Duncan Wrigley at Pantheon explained.

“The February data point to an increased likelihood of a soft landing for global demand in the first half.”

Finally, in Australia, the economy grew 2.7% for the entirety of 2022, meeting economists' expectations, but lower than the 5.9% growth seen in 2021.

On a quarterly basis, gross domestic product (GDP) rose 0.5%, marking the fifth consecutive quarterly growth.

“The real economy is slowing due to the re-opening impulse fading and tighter monetary policy,” said Sean Langcake, head of macroeconomic forecasting at Oxford Economics.

“Still, there is little in today’s data that suggests Australia’s inflation problem is solved.”

Langcake noted that domestic price inflation slowed slightly in the fourth quarter, aided by the resolution of supply disruptions, although the pace of price growth remained a concern.

“The growth outlook for 2023 is challenging, with growth set to slow further as the economy works against brisk inflation and higher interest rates.”

Reporting by Josh White for Sharecast.com.