Asia report: Stocks mixed as data shows contraction in Chinese industry

Stock markets were mixed in Asia on Friday, with Chinese technology firms falling after private sector data showed a contraction in the country’s manufacturing sector in March.

In Japan, the Nikkei 225 was down 0.56% at 27,665.98, as the yen weakened 0.58% against the dollar to last trade at JPY 122.41.

Technology conglomerate SoftBank Group managed gains of 0.34%, while among the benchmark’s other major components, automation specialist Fanuc was down 0.12% and fashion firm Fast Retailing lost 1.14%.

The broader Topix index was 0.11% weaker by the end of trading in Tokyo, settling at 1,944.27.

Sentiment among Japanese manufacturers plunged in the March quarter, according to the Bank of Japan’s latest Tankan survey, with the headline index for large industry falling to 14 from 17 in the prior quarter.

“The Tankan reinforced the message of the PMIs for the first three months of 2022, showing only a modest quarterly slowdown for large manufacturers in the first quarter, whether or not we seasonally adjust the data,” said Craig Botham at Pantheon Macroeconomics.

“Activity was unchanged overall for large non-manufacturing firms, though smaller firms came under pressure, likely as a result of Japan’s Omicron outbreak.

“Unsurprisingly, the output and input price components saw sharp increases over the quarter for manufacturers, driven by a jump in basic material costs.”

Botham said the survey also showed a “sharp slowdown” in capital expenditure, implying a weak outturn in the first quarter GDP numbers.

“The authorities are already braced for a disappointing first quarter, given the multiple headwinds encountered, and will be encouraged that the PMIs suggest a revival is underway.

“This will add to calls for further fiscal stimulus, and entrench [Bank of Japan] governor Kuroda’s dovish mindset - though we still question whether a weaker yen is really helping at this point.”

On the mainland, the Shanghai Composite was ahead 0.94% at 3,282.72, and the smaller, technology-heavy Shenzhen Composite rose 0.47% to 2,127.82.

The unofficial Caixin/Markit manufacturing purchasing managers’ index (PMI) came in at 48.1 for March - down from 50.4 in February and making for the lowest reading since February 2020.

It was also well below the 50-point level that separates expansion from contraction, backing up the official manufacturing PMI on Thursday, which also showed a shrinking for the sector.

The Caixin PMI readings generally reflect smaller private companies in the People’s Republic, while Beijing’s official measures are seen as representing large, state-affiliated industry.

Craig Botham at Pantheon said restrictions aimed at bringing China’s worst Covid outbreak since early 2020 were “exacting a heavy toll” on the economy.

“Worse is likely to come for China’s PMIs,” he said.

“Not only do infections continue to rage, but Omicron has reportedly resurfaced in Shenzhen, suggesting the city may have been too hasty in relaxing its controls, and acting as a warning to other regions of China, which will now likely pursue existing stringent measures for longer.”

South Korea’s Kospi slipped 0.65% to 2,739.85, while the Hang Seng Index in Hong Kong eked out gains of 0.19% to 22,039.55.

Chinese tech names were in focus in the special administrative region, with the Hang Seng Tech Index ending the day down 0.74%.

Among the major players in the sector, Alibaba Group was down 2.14%, Baidu tumbled 4.45% and JD.com was off 2.14%, although Tencent Holdings rose 1.23%.

The embattled property sector was also being closely watched, with Kaisa Group and Sunac China both suspended from trading after missing their deadlines for annual results.

Seoul’s blue-chip technology stocks were on the back foot, with Samsung Electronics down 0.72% and SK Hynix losing 1.69%.

Oil prices were higher as the region entered the weekend, with Brent crude futures last up 0.37% on ICE at $105.10 per barrel, and West Texas Intermediate ahead 0.08% on NYMEX at $100.36.

In Australia, the S&P/ASX 200 slipped 0.08% to 7,493.80, while across the Tasman Sea, New Zealand’s S&P/NZX 50 lost 0.17% to 12,089.43.

The down under dollars were in a mixed state against the greenback, with the Aussie last 0.37% stronger at AUD 1.3312, while the Kiwi weakened 0.01% to NZD 1.4423.