Asia report: Markets mixed, China rolls over medium-term facility

Stock markets were in a mixed state in Asia on Monday, as investors weighed continued fears of recession and after China’s central bank rolled over its medium-term lending facility.

In Japan, the Nikkei 225 was down 1.16% at 26,775.79, as the yen weakened 0.06% against the dollar to last trade at JPY 148.76.

Automation specialist Fanuc was down 0.59%, fashion firm Fast Retailing lost 1.28%, and technology conglomerate SoftBank Group was off 1.79%.

The broader Topix index was off 0.98% by the end of trading in Tokyo, settling at 1,879.56.

On the mainland, the Shanghai Composite was up 0.42% at 3,084.94, and the technology-heavy Shenzhen Component was ahead 0.37% at 11,162.26.

China’s central bank sated market expectations on interest rates earlier in the session, standing pat on the medium-term lending facility at 2.75%.

The People’s Bank of China confirmed it would keep the one-year rate on hold as it rolled over the lending facility, injecting CNY 500bn (£61.54bn) in the process.

Economists polled by Reuters had anticipated no change in the facility’s rate.

“The PBoC refrained from using the MLF tool to either ease or tighten financial conditions in September,” said Duncan Wrigley at Pantheon Macroeconomics.

“The injection of CNY 500bn in liquidity matched the CNY 500bn of maturities during the month, resulting in zero net liquidity injection.”

Wrigley said that despite a weak economy, China’s central bank was “holding back” from broad monetary easing.

“We see this as an implicit acknowledgement that monetary policy is largely ineffective to support growth under current constraints, especially the property market woes and zero-Covid policy.

“In other words, China is caught in a liquidity trap - cutting rates would also put further pressure on the renminbi.

“We expect China to rely on fiscal policy to manage growth, while monetary policy plays only an accommodating role.”

As such, Wrigley said the PBoC was likely to make no change to the benchmark lending rate - the loan prime rate - on 20 October.

South Korea’s Kospi managed gains of 0.32% to 2,219.71, while the Hang Seng Index in Hong Kong was 0.15% firmer at 16,612.90.

The blue-chip technology stocks were mixed in Seoul, with Samsung Electronics up 0.53%, while SK Hynix lost 0.31%.

“Asian markets were unable to gain a steady footing, with mixed economic projections exacerbated by the ongoing strength of the US dollar, which increases the price of imports and debt repayments for some countries in the region,” said Interactive Investor head of markets Richard Hunter on Monday’s situation.

“The ongoing weakness of the largest local market in China has also led to declines for which the authorities stand ready to intervene, although so far any such moves have been limited.”

Oil prices were higher at the end of the Asian day, with Brent crude futures last up 0.26% on ICE at $91.87 per barrel, and West Texas Intermediate advancing 0.06% to $85.66 on NYMEX.

In Australia, the S&P/ASX 200 lost 1.4% to close at 6,664.40, while across the Tasman Sea, New Zealand’s S&P/NZX 50 was 0.76% weaker at 10,785.92.

Both of the down under dollars were stronger on the greenback, with the Aussie last ahead 0.79% at AUD 1.6002, and the Kiwi advancing 0.8% to NZD 1.7836.

Reporting by Josh White at Sharecast.com.