Asia report: Most markets rise on central bank optimism

(Sharecast News) - Asia-Pacific markets saw gains on Friday, with Hong Kong leading the way, as investors continued to ride the wave of optimism following the US Federal Reserve's decision to maintain interest rates and provide a plan for rate cuts from 2024. China released economic data that showed its industrial output expanded at its fastest pace since February 2022 in November, although retail sales growth fell short of expectations.

"Stocks in the Asia-Pacific region mostly traded higher, buoyed by positive sentiment from Wall Street, supported by favourable data and decreasing yields following the recent dovish pivot by the Federal Reserve," said TickMill market analyst Patrick Munnelly.

"The Nikkei 225 rose, surpassing the psychological 33,000 handle; the Hang Seng surged by 2.7%, outperforming on the back of strength in the tech sector, while the Shanghai Composite varied with a marginal decrease.

"Notably, in China, industrial production exceeded estimates, but retail sales fell short, house prices continued to decline, and attention was on the People's Bank of China maintaining its one-year medium-term lending facility rate at 2.5% while injecting a record amount through the facility."

Most markets finish Friday's session in the green

In Japan, the Nikkei 225 index rose by 0.87% to reach 32,970.55, while the Topix index increased by 0.47% to reach 2,332.28.

Leading the gains on Japan's benchmark were Mitsui OSK Lines, which saw a 7.07% gain, Kawasaki Kisen Kaisha with a 6.93% increase, and Yaskawa Electric, which climbed by 6.84%.

Meanwhile, in China, the Shanghai Composite index dipped by 0.56% to settle at 2,942.56, and the Shenzhen Component declined by 0.35% to reach 9,385.33.

Shanghai's biggest losses included Appotronics, down by 8.39%, and Bafang Electric Suzhou, which saw a 7.53% decrease.

Hong Kong's Hang Seng Index stood out with a significant gain of 2.38%, closing at 16,792.19.

Companies like Orient Overseas International, JD.com, and Xinyi Solar performed well, recording increases of 9.37%, 6.98%, and 6.85%, respectively.

In South Korea, the Kospi index posted a 0.76% gain, closing at 2,563.56, with EcoPro Materials rocketing 18.79%, and Hanwha Solutions rising 7.87%.

Australia's S&P/ASX 200 index climbed by 0.88% to reach 7,442.70.

HMC Capital and Summerset Group were among the top performers in Sydney, with gains of 9.17% and 7.8%, respectively.

New Zealand's S&P/NZX 50 index had a minor dip of -0.02%, closing at 11,550.20, led lower by Pacific Edge with a 6.25% decrease, while EBOS Group saw a 3.28% decline.

In currency markets, the dollar was last down 0.17% against the dollar, trading at JPY 141.65.

The greenback was also weaker against its downunder counterparts, falling 0.17% on the Aussie to AUD 1.4886, and retreating 0.22% against the Kiwi to change hands at NZD 1.6076.

Oil prices saw modest gains, with Brent crude futures last up 0.56% on ICE at $77.04 per barrel, and the NYMEX quote for West Texas Intermediate increasing 0.66% to $72.05.

Industrial output grows in China, retail sales disappoint

In economic news, China reported robust industrial output growth in November, as the National Bureau of Statistics said output expanded by 6.6% compared to the prior year, surpassing Reuters-polled expectations for 5.6%.

The growth came on the heels of a 4.6% rise in October.

However, retail sales growth missed expectations, with a 10.1% increase in November compared to a year ago, falling short of the anticipated 12.5% spike.

Retail sales had risen by 7.6% in October.

Fixed asset investment in urban areas grew by 2.9% cumulatively in the first 11 months of the year, slightly below the expected 3% growth rate.

China's urban unemployment rate remained steady at 5% in November.

To maintain reasonable liquidity in the banking system, China's central bank conducted a reverse repurchase operation of CNY 50bn (£5.5bn), and injected CNY 1.45trn of medium-term facility loans.

The interest rate for the medium-term lending facility (MLF) was held at 2.5%, while the rate for the seven-day reverse repurchases was maintained at 1.8%.

"Falling global yields mean China theoretically has more room to ease monetary policy, but the impact of rate cuts would be limited given the troubled property sector," said Pantheon Macroeconomics chief China economist Duncan Wrigley.

"The CEWC confirms that policymakers have prioritised restructuring the economy towards high-end manufacturing and innovation, and away from debt-heavy sectors like property."

Wrigley said the property sector was showing marginal improvement, adding that indications suggested policy would continue to be stepped up incrementally, notably on the developer funding side.

"This means private consumption is likely to remain fairly sluggish in the first half, and China will continue to issue dollops of fiscal support to prop up activity."

In Japan, manufacturing activity continued to contract for the seventh consecutive month in December, according to the au Jibun Bank Japan manufacturing purchasing managers' index (PMI).

The flash reading for December came in at 47.7, down from 48.3 in November, indicating the quickest deterioration in manufacturing conditions in ten months.

A reading below 50 suggests contraction, while one above denotes expansion.

On the brighter side, the au Jibun Bank flash services PMI for December was 52.0, up from 50.8 in November, marking the fastest gain in three months.

However, the survey noted that services growth remained softer than the average seen throughout 2023.

Total new business expanded slightly faster in December, despite a slight dip in new export sales.

"The Bank of Japan is likely to retain the negative rate policy at its meeting next week, despite the PMIs indicating rising cost pressures for both services and manufacturing firms," said Duncan Wrigley at Pantheon.

"The rise in output prices in the services PMIs hasn't yet translated into broad consumer services inflation.

"Consumer inflation has slowed, notably the Tokyo CPI excluding fresh food dropping to 2.3% year-on-year in November, not far off the 2% inflation target."

In Australia, private sector activity showed signs of improvement in December, albeit remaining in contraction territory, according to flash estimates from Judo Bank.

The composite PMI for the country stood at 47.4, up from a 27-month low of 46.2 in November.

Australia's manufacturing PMI was at 47.8, slightly higher than the 47.7 in the prior month, while services PMI came in at 47.6, indicating a slower rate of contraction compared to November's 46.0.

Judo Bank noted that demand conditions remained under pressure in December, but inflation for input costs eased.

Employment continued to grow, and companies' optimism improved compared to November.

Reporting by Josh White for Sharecast.com.