Asia report: Stocks mixed as China's factory activity contracts

Asia-Pacific stock markets ended in a mixed condition on Friday, reflecting investors' cautious sentiment as they evaluated the implications of recent data indicating a contraction in Chinese factory activity.

“Asian equity markets traded cautiously into month and quarter end, with modest gains against the backdrop of a higher yield environment,” said TickMill market analyst Patrick Munnelly.

“Market participants were digesting a series of data releases at the end of the quarter, including the latest official PMIs from China.

“The Nikkei 225 in Japan declined, impacted by mixed data such as disappointing Industrial Production and softer-than-expected Tokyo CPI.”

However, Munnelly noted that the losses were cushioned by recent currency movements, with the yen briefly reaching its highest level on the dollar since November.

“The Hang Seng and the Shanghai Composite gained following the release of Chinese PMI data.

“While headline manufacturing PMI matched estimates at 49.0, non-manufacturing PMI was slightly below expectations at 53.2 but still indicated a solid expansion.”

Mixed fortunes for Asia-Pacific stock markets

Japanese markets observed a slight downturn, with the Nikkei 225 falling by 0.14% to close at 33,189.04, and the broader Topix index decreasing by 0.33% to settle at 2,288.60.

Companies particularly impacted on Tokyo’s benchmark included Daiichi Sankyo, down 2.49%, Nippon Sheet Glass, falling 2.33%, and Seven & i Holdings, sliding 1.99%.

China's markets meanwhile shrugged off the negative factory data, with the Shanghai Composite and the Shenzhen Component indices rising by 0.62% and 1.02%, closing at 3,202.06 and 11,026.59 respectively.

Fujian Qingshan Paper and Anhui Tongfeng outperformed, registering substantial gains of 10.11% and 10.03% respectively.

In Hong Kong, the Hang Seng Index retreated slightly by 0.1%, closing at 18,916.43.

Leading the losers, Lenovo Group, Meituan, and Longfor Properties slipped by 2.04%, 1.92%, and 1.86% respectively.

South Korea's Kospi rose 0.56% to end at 2,564.28, bolstered by strong performances from SK IE Technology, up 7.32%, and Yuhan, which advanced 5.04%.

Australia's S&P/ASX 200 nudged higher by 0.12% to close at 7,203.30, with notable performers including PSC Insurance Group, skyrocketing 14.82%, and Macquarie Technology Group, which jumped 4.87%.

New Zealand's S&P/NZX 50 recorded the biggest gain among the Asia-Pacific markets, rising 0.92% to finish at 11,916.47.

Vista Group and Arvida significantly contributed to this surge, gaining 5.49% and 5% respectively.

On the currency front, the Japanese yen, Australian dollar, and New Zealand dollar each strengthened slightly against the US dollar, advancing 0.09% to JPY 144.63, 0.07% to AUD 1.5104, and 0.22% to NZD 1.5437, respectively.

Oil prices remained relatively stable, with Brent crude futures standing still on ICE at $74.34 per barrel, and the NYMEX quote for West Texas Intermediate creeping up 0.04% to $69.89.

Mixed economic signals across Asia; China's factory activity contracts

In economic news, China’s manufacturing industry continued to face headwinds, according to the latest data from the National Bureau of Statistics.

For the third month in a row, the purchasing managers' index (PMI) remained below the critical 50-point mark, indicating contraction rather than growth in the sector.

The PMI score for June registered at 49, a slight uptick from May's reading of 48.8, which was the lowest since last December.

“The manufacturing PMI is likely to confirm policymakers’ view that demand is insufficient, while business sentiment remains poor.,” said Duncan Wrigley at Pantheon Macroeconomics.

“The grim global outlook for H2 means that China will needs to shore up domestic demand.

“We expect China to offer additional, though restrained, fiscal and quasi-fiscal growth support, following the 10-basis point benchmark lending rate cuts, as well as targeted support for the property sector.”

In Japan, the consumer price index (CPI) in Tokyo demonstrated persistent inflationary pressures, as the overall CPI rose 3.1% in June compared to the same period last year, exceeding the Bank of Japan's target.

When fresh food was excluded, Tokyo's CPI went up 3.2% year-on-year, still higher than the central bank's target for the 13th consecutive month but below economists' prediction of 3.3% as set in a recent Reuters poll.

Without both food and energy, consumer prices saw a year-on-year rise of 2.3% but dipped slightly by 0.2% compared to the prior month.

Finally, South Korea posted strong industrial output figures, rising 3.2% in May compared to April, as per government data.

The surge was primarily driven by production in automobiles and semiconductors.

However, the country's financial, insurance, and hospitality sectors witnessed downturns during the same period.

The robust growth in industrial production defied economists' predictions in a Reuters poll, which had forecasted a fall of 0.8% after a decline of 0.6% in the previous period.

Reporting by Josh White for Sharecast.com.