Asia: Tokyo and Shanghai close higher despite manufacturing PMI misses

Japan's Nikkei and China's Shanghai composite indices were just in positive territory by the close, despite slightly disappointing flash manufacturing PMI prints, while the Hang Seng and Straits Times were both slightly in the red on Thursday morning.

The HSBC-Markit China PMI Manufacturing data for November confirmed a slowing trend of growth in the world’s second largest economy, with a flash print of 50 versus the 50.2 consensus forecast. A reading of 50 is the level that separates growth from contraction.

Early on Thursday, lending rates in China spiked on heightened demand for liquidity ahead of a raft of upcoming initial public offering (IPOs) next week, with the benchmark seven-day repurchase rate at one point in the day spiking as much as 200 basis points and the National Interbank Funding Center forced to extend its trading hours by 30 minutes.

China's PMI figure has now fallen to a six-month low after hitting 50.4 for October's final print, while on the production side the output print hit a seven-month low at 49.5, indicating contraction.

Beijing also announced a raft of new measures to loosen credit to lower bank funding costs together with policies to make IPOs easier.

During its executive meeting on Wednesday, the Council revealed new measures to loosen bank requirements on loan-to-deposit ratios and the management of loan quotas, as well as measures to prevent high interest rates, plus new government support for cross-border financing to take advantage of lower funding costs overseas.

A Morgan Stanley note on Beijing's new credit loosening policies, said "Lower real rates will help. Policy makers have and will continue to introduce more targeted measures to lower funding costs, including credit easing. While the yield curve has shifted down notably in recent months with the help of PBOC’s targeted easing measures through MLF, bank’s lending rate remained elevated."

Analysts said they expect looser financial conditions to help all sectors, not just the ones targetted, and added that they believed the likelihood of a universal reserve requirement ratio or interest rate cut is "low in the near term".

Japan PMI, trade data and tax plans

Manufacturing data from Japan was also slightly weaker, with a print of 52.1 lower than the 52.7 expected by a consensus of economists.

But there was more positive Japanese news as trade data showed exports in October had risen by the most in eight months, no coincidence as Thursday also saw the Japanese yen fall to another seven-month low at ¥118.16 to the US dollar.

The yen was forced lower as minutes from the latest Federal Reserve policy meeting indicated the US central bank's decision to end quantitative easing was a relatively easy one, in contrast to the Bank of Japan's recent loosening of its own policy.

Prime Minister Shinzo Abe's ruling coalition was reported to be planning a cut on taxes on food and other necessities at the future date to soften its planned increase in sales tax in 2017

The lower tax rates will form a plank in a joint platform for Abe's Liberal Democratic Party and its smaller partner Komeito in the coming general election, according to the Nikkei Asian Review.