Asia report: Markets rise, manufacturing growth slows in China

Markets in Asia were higher across the board on Monday, as investors digested the latest manufacturing data out of China, which showed slowing growth for the sector.

In Japan, the Nikkei 225 was up 2.41% at 29,663.50, as the yen weakened 0.14% against the dollar to last trade at JPY 106.72.

Of the major components on the benchmark index, automation specialist Fanuc was up 1.06%, fashion firm Fast Retailing added 2.71%, and technology conglomerate SoftBank Group rose 5.46%.

The broader Topix index was 2.04% higher by the end of trading in Tokyo, settling at 1,902.48.

On the mainland, the Shanghai Composite was ahead 1.21% at 3,551.40, and the smaller, technology-heavy Shenzhen Composite was 2.42% firmer at 2,349.17.

China’s official manufacturing purchasing managers’ index (PMI) came in at 50.6 for February, which was down from the 51.3 reading for January, but still above the 50-point level that separates expansion from contraction.

The unofficial Caixin/Markit PMI also reflected the picture of slowing growth, coming in at 50.9 for February, down from 51.5 in January.

China’s official non-manufacturing PMI, meanwhile, dropped to 51.4 in February, from 52.4 in January, below consensus forecasts for 52.0.

Pantheon Macroeconomics chief Asia economist Freya Beamish noted that residual seasonality was “modest” at the headline level.

“That’s because the seasonals for the subindex go in opposite directions, with construction damaged by the holiday, but services boosted.

“We reckon the construction index still dropped sharply in February, though, to 57.2, from January’s 59.6.”

Beamish said the government was pulling back on local debt-financed infrastructure investment, though that drop was sharper than expected.

“Our adjusted services index edged up trivially to 51.0, from January’s 50.9.

“Our adjustment model has been having difficulties with this series since the Covid crisis, though, so this is where we have least confidence.

“High frequency data reveal a heavily bifurcated performance across the sector, with travel clobbered, but logistics booming, and real estate, retail and catering somewhere in between.”

Overall, Beamish said performance should improve once restrictions are lifted.

South Korea’s markets were closed for the Independence Day holiday, while the Hang Seng Index in Hong Kong moved up 1.63% to 29,452.57.

Oil prices were higher at the end of the Asian day, with Brent crude last up 1.37% at $65.30 per barrel, and West Texas Intermediate rising 1.38% to $62.35.

In Australia, the S&P/ASX 200 gained 1.74% to 6,789.60, while across the Tasman Sea, New Zealand’s S&P/NZX 50 managed to rise 0.61% to 12,301.81.

The down under dollars were stronger on the greenback, with the Aussie last ahead 0.4% at AUD 1.2915, and the Kiwi advancing 0.09% to NZD 1.3813.