Asia report: Stocks mixed as PBoC trims loan prime rates

Asia-Pacific stocks ended Tuesday's trading session on a mixed note, following a decision by the People's Bank of China to trim two critical interest rates by 10 basis points.

“Most Asian equity markets experienced a decline in the absence of guidance from Wall Street, as the Juneteenth holiday and the People's Bank of China's (PBoC) reduction in benchmark lending rates influenced market sentiment,” said TickMill market analyst Patrick Munnelly.

“The release of Reserve Bank of Australia (RBA) minutes from the June meeting, which indicated a delicate balance between a 25-basis point hike and maintaining steady rates, influenced market dynamics.

“Currently, money markets are leaning towards unchanged rates for the next month.”

Stocks close mixed after China’s loan prime rate cuts

Japan's benchmark Nikkei 225 modestly rose by 0.06% to 33,388.91 points, bolstered by the strong performances of Mitsubishi Corporation, Mitsui, and SoftBank Group, which gained 3.72%, 3.31%, and 2.84% respectively.

However, the broader Topix index slipped by 0.29% to close at 2,283.85 points.

China's Shanghai Composite Index fell by 0.47% to 3,240.36, despite the central bank's monetary easing.

Conversely, the Shenzhen Component index bucked the downward trend and advanced 0.28% to 11,305.35.

Among the significant laggards in Shanghai were Fujian Qingshan Paper and GuangDong Super Telecom, which plunged by 6.13% and 6.05% respectively.

Hong Kong's Hang Seng Index was also in the red, tumbling 1.54% to 19,607.08.

Shares of WuXi Biologics dramatically dropped by 17.02%, while Country Garden Services and Country Garden Holdings also posted substantial losses of 6.97% and 6.78% respectively.

South Korea's Kospi index edged down 0.18% to close at 2,604.91, dragged by losses in CJ Cheiljedung and Hanwha Solutions, which fell by 3.79% and 3.34% respectively.

On a brighter note, Australia's S&P/ASX 200 climbed 0.86% to 7,357.80, led by gains in Summerset Group Holdings, AUB Group, and HUB24, which advanced 3.55%, 3.49%, and 3.48% respectively.

Similarly, New Zealand's S&P/NZX 50 index rose modestly by 0.33% to 17,789.37 points.

In the forex markets, the yen strengthened 0.4% on the dollar to last trade at JPY 141.41.

Meanwhile, the Australian dollar and New Zealand dollar weakened, with the former off 0.86% on the greenback to AUD 1.4722, and the Kiwi retreating 0.37% to change hands at €1.6187.

In energy markets, Brent crude futures rose 1.09% on ICE to $76.92 per barrel, while the NYMEX quote for West Texas Intermediate were also up, by 0.43% at $72.09 per barrel.

China cuts loan prime rates, RBA releases latest minutes

On the economic front, the People's Bank of China (PBoC) trimmed its pivotal one-year and five-year loan prime rates (LPRs) by 10 basis-points each in its first cut since last August.

The move saw the one-year LPR at 3.55%, down from 3.65%, and the five-year LPR at 4.20%, down from 4.30%.

It paralleled the recent adjustments to China's short-term and medium-term loan rates, reflecting a loosening monetary policy stance to boost economic growth.

“The State Council on Friday discussed the need for further policies to boost growth momentum, and proposed policy measures to improve macro policies, expand effective demand, strengthen and optimise the real economy, and prevent and resolve risks in key fields, without giving further details,” noted Duncan Wrigley at Pantheon Macroeconomics.

“We think that ‘improve macro policies’ signals a likely reserve ratio requirement (RRR) cut in the third quarter, and the readiness to make further lending rate cuts in the fourth as needed.

Policies to ‘expand effective demand’ probably refer to additional local government special bond quota and policy bank credit and financial development instrument funding.”

On the other hand, Australia's central bank cited upward pressure on inflation as the reason for its decision to increase its base rate to 4.1%.

The recent move comes as cane data has "shifted to the upside," according to the bank, indicating that domestic inflation is anticipated to take longer to return to its target than expected.

In the minutes from the RBA's June meeting, it said it was evident that the decision was a contested one.

Board members were torn between keeping rates steady to further analyse incoming data or raising rates to curtail inflation, which was already forecasted to exceed the target for several years.

Ultimately, the urgency to mitigate inflation prevailed, underpinned by the projection that inflation's return to the target level would likely be more protracted in Australia than in other countries.

Reporting by Josh White for Sharecast.com.