Asia report: Stocks weaker, Japan manufacturing growth slows

Stocks in Asia fell back on Tuesday, reversing the broad positive movements on Monday, with technology plays in China once again leading the losses.

In Japan, the Nikkei 225 was down 0.94% at 26,748.14, as the yen strengthened 0.45% on the dollar to last trade at JPY 127.33.

It was a negative day for the benchmark’s major components, with robotics specialist Fanuc down 0.19%, Uniqlo owner Fast Retailing off 0.98%, and tech investing giant SoftBank Group 1.61% weaker.

Vehicle giant Toyota Motor was 0.56% lower, after it announced it was slashing 100,000 vehicles from its global production plans for June, to 850,000, amid the ongoing semiconductor shortage.

The broader Topix index was 0.86% weaker by the end of trading in Tokyo, closing at 1,878.26.

Fresh data out of Tokyo showed manufacturing activity in Japan growing at its slowest cadence in three months in May.

The flash manufacturing purchasing managers’ index (PMI) from au Jibun Bank came in at a seasonally-adjusted 53.2, down from 53.5 in April.

Craig Botham at Pantheon Macroeconomics said new export orders, which do not affect the headline reading, also dropped to 46.1 in May from 47.1 in April.

“We think this reflects the continued impact of China’s zero-Covid lockdowns, which weigh on Sino-Japanese trade but also disrupt regional trade networks, and then have knock-on effects to domestic orders,” Botham noted.

“Supply chains look even more stressed in May, with the supplier delivery times index falling again, to 36.3, from 37.8, a new record low.

“This has also fed into higher costs for manufacturers, exacerbated by yen weakness, with input prices touching a new high.

“The output price index, however, fell in May, suggesting renewed margin compression, and limited passthrough to core CPI.”

On the mainland, the Shanghai Composite slid 2.41% to 3,070.93, and the smaller, technology-centric Shenzhen Composite tumbled 3.62% to 1,922.48.

South Korea’s Kospi was 1.57% lower at 2,605.87, while the Hang Seng Index in Hong Kong lost 1.75% to 20,112,10.

The Hang Seng Tech Index was off 3.48%, with China's major technology stocks all on the back foot in the special administrative region.

Alibaba Group was down 1.76%, JD.com plunged 5.26%, Meituan was off 4.83%, NetEase lost 1.88%, and Tencent Holdings was 2.54% weaker.

Electric car manufacturer Xpeng was also in focus, tumbling 9.14% after it reported first quarter net losses of CNY 1.7bn, widening from CNY 786.6m year-on-year.

Seoul’s blue-chip technology stocks were on the back foot as well, with Samsung Electronics down 2.06% and SK Hynix sliding 3.98%.

Oil prices were lower as the region went to bed, with Brent crude last down 0.35% on ICE at $113.05 per barrel, and the NYMEX quote for West Texas Intermediate also falling 0.35% to $109.90.

In Australia, the S&P/ASX 200 slipped 0.28% to 7,128.80, while across the Tasman Sea, New Zealand’s S&P/NZX 50 was 0.61% weaker at 11,247.03.

Both of the down under dollars were weaker against the greenback, with the Aussie last off 0.51% at AUD 1.4139, and the Kiwi retreating 0.56% to NZD 1.5548.

Reporting by Josh White at Sharecast.com.