Asia report: Stocks surge across region after China data dump

(Sharecast News) - Asia-Pacific markets managed a positive upswing on Wednesday, with Hong Kong stocks taking the lead, fueled by encouraging economic data from China. Additionally, a soft US inflation reading ignited optimism that the Federal Reserve could be approaching the end of its interest rate-hiking cycle.

"Asia stocks experienced an uptick as global risk sentiment improved," said TickMill market analyst Patrick Munnelly.

"The catalysts for this positive shift included weaker-than-expected US consumer price index (CPI) data, which led to a more dovish outlook from the Federal Reserve, raising hopes that the Fed might conclude its rate-hiking cycle.

"Additionally, the region witnessed better-than-expected Chinese activity data."

Munnelly noted that industrial production and retail sales surpassed expectations in China, contributing to positive sentiment.

"Reports suggesting that China is contemplating CNY 1trn in new funding for the housing market further boosted investor confidence.

"Additionally, the People's Bank of China (PBoC) conducted its largest medium-term lending facility (MLF) net injection in seven years."

Equity markets surge across the region

In Japan, the Nikkei 225 jumped 2.52%, closing at 33,519.70, while the Topix index saw a gain of 1.19%, reaching 2,373.22.

Leading the gains on Tokyo's benchmark was Idemitsu Kosan, with a remarkable rise of 18.29%, followed by Terumo at 11.45% and Ebara at 9.7%.

In mainland China, the Shanghai Composite index registered a modest uptick of 0.55%, closing at 3,072.83, while the Shenzhen Component edged up by 0.72%, closing at 10,077.96.

HangZhou Iron & Steel and Epoxy Base Electronic Material made notable gains in Shanghai, surging by 10.1% and 10.08%, respectively.

Hong Kong's Hang Seng Index leapt 3.92% to reach 18,079.00.

Techtronic Industries, Xinyi Solar Holdings, and China Resources Mixc Lifestyle led the impressive performance, posting gains of 10.47%, 7.49%, and 7.03%, respectively.

South Korea's Kospi index increased 2.2%, closing at 2,486.67, with Netmarble Games and Hanwha Ocean playing a significant role with gains of 8.3% and 7.97%, respectively.

Australia's S&P/ASX 200 rose 1.42% to end the day at 7,105.90, with Charter Hall Group and APM Human Services rising a respective 10.33% and 10.04% in Sydney.

Across the Tasman Sea, New Zealand's S&P/NZX 50 index experienced a positive trend, with an increase of 1.61% to reach 11,352.84.

Pacific Edge and Port of Tauranga led Wellington's growth, posting gains of 10% and 6.2%, respectively.

In currency markets, the dollar was last 0.07% stronger on the yen, trading at JPY 150.48.

At the same time, the greenback was 0.11% weaker against the Aussie at AUD 1.5350, while it retreated 0.52% against the Kiwi, changing hands at NZD 1.6557.

In oil markets, Brent crude futures were last down 0.49% on ICE at $82.07 per barrel, while the NYMEX quote for West Texas Intermediate declined 0.6% to $77.79.

Retail sales and factory output expand in China

In economic news, China reported stronger-than-expected improvements in retail sales and factory output for October, according to the National Bureau of Statistics.

Retail sales increased 7.6% year-on-year in October, surpassing the 5.5% rise observed in September and exceeding analysts' expectations of a 7% increase.

Meanwhile, industrial production saw growth of 4.6%, slightly higher than the 4.5% rise in September, marking the most robust expansion since April, against market consensus for no change.

Fixed asset investment also rebounded, rising by 2.9% year-on-year, following a 3.9% decline in September.

"China is likely to continue to use dollops of fiscal support to prop-up growth against the headwinds of falling property investment and exports in the first half of 2024," said Duncan Wrigley, chief China economist at Pantheon Macroeconomics.

"We see little chance of a mega stimulus. Policymakers are keen to restructure the economy towards manufacturing - especially high-tech manufacturing - and away from the property sector, and recognise this means a longer, tortuous recovery."

However, the real estate sector in China, which has been grappling with challenges, continued to struggle.

Property investment declined by 9.3% year-on-year in October, following a 9.1% drop in September.

The improved economic figures can partly be attributed to favourable base effects, as stringent lockdown measures from the previous year weighed heavily on consumer demand and industrial output.

"Real economic activity appears to hold up relatively well for the Chinese consumer, although this is likely also helped by festivities-related spending in early October," said Louise Loo, China economist at Oxford Economics.

"Industrial production strengthened as destocking pressures further eased, but weaker-for-longer external demand may weigh eventually on its uptrend.

"China is in the middle of a multi-year housing correction, so property weakness will be a consistent theme over the next few years."

The data release coincided with the People's Bank of China's latest decision on interest rates.

As widely anticipated, the central bank maintained its benchmark one-year medium-term loan facility (MLF) at 2.5%.

Meanwhile, provisional government data in Japan revealed that the country's economy contracted for the first time in four quarters in the July-September quarter.

The provisional gross domestic product (GDP) reading showed a 2.1% decline compared to the same period a year ago, with a 0.5% decrease from the prior quarter.

Economists surveyed by Reuters had pencilled in an annualised 0.6% decline and a quarter-on-quarter contraction of 0.1%.

Reporting by Josh White for Sharecast.com.