Asia report: Markets mixed as investors weigh Covid-19 news

Markets in Asia were in a mixed state at the end of Friday’s session, as investors continued to weigh concern around the short-term impacts of the Covid-19 pandemic against recent positive news around potential vaccines for the coronavirus.

In Japan, the Nikkei 225 was down 0.42% at 22,527.37, as the yen weakened 0.09% against the dollar to last trade as JPY 103.83.

Technology conglomerate SoftBank Group was up 2.62%, while among the benchmark’s other major components, automation specialist Fanuc was down 0.26% and fashion firm Fast Retailing was 2.55% weaker.

The broader Topix index eked out gains of 0.06% by the end of trading in Tokyo, closing at 1,727.39.

Fresh data out of Japan showed the country’s core consumer price index as falling at its fastest pace in almost 10 years in October, with its decline in manufacturing activity also hastening in its latest measure.

The core CPI, which excludes fresh food, was down 0.7% year-on-year, meeting market forecasts, making for the third month of declines in a row, and coming in as the largest decline since March 2011.

“The economy’s descent into outright deflation has been a long time coming; much of the drop last month was down simply to the lift from last year’s consumption tax hike coming out of the picture,” said Pantheon Macroeconomics senior Asia economist Miguel Chanco.

“This was exacerbated by Tokyo’s late inclusion in the Go To Travel subsidies, which exerted even more downward pressure on the cost of recreational services.”

Meanwhile, the au Jibun Bank flash manufacturing purchasing managers’ index was down to a seasonally-adjusted 48.3 for November, from a final reading of 48.7 in October.

It was the 19th consecutive month that the measure had been below the 50-point mark that separates expansion from contraction, and was the first time the pace of contraction had accelerated in six months.

“Bloomberg reports no consensus [on the PMI reading], but the decline was sharper than we expected,” Chanco said.

“The hit was broad-based, with the output, new orders and employment components all falling from September.

“Employment suffered the biggest change in fortunes, with its relative stability last month proving to be short-lived.”

On the mainland, the Shanghai Composite added 0.44% to 3,377.73, and the smaller, technology-heavy Shenzhen Composite rose 0.6% to 2,289.51.

The People’s Bank of China stood pat on its benchmark loan prime rates for the seventh month in a row, with the one-year rate at 3.85% and the five-year rate being 4.65%.

“We continue to believe that the PBoC's easing of monetary policy is over, even if the recovery’s momentum fades somewhat before the end of the year,” Miguel Chanco noted.

“The ongoing acceleration in M1 growth suggests that the 2021 upturn is secure.

“The bank’s next move is likely to be a rate increase, though this is unlikely to happen until the back end of next year, when the economy’s recovery is strong enough to stomach a normalisation of monetary policy.”

Chanco said Pantheon was currently expecting 30 basis points of MLF rate hikes in the fourth quarter of 2021.

A number of banks were also in the spotlight in China, as the bond market self-regulatory body said it would launch investigations following the shock bond default by a state-owned coal miner last week.

The National Association of Financial Market Institutional Investors said it would probe China Everbright Bank, Industrial Bank and Zhongyuan Bank, all of which were involved in the issue of bonds by Yongcheng Coal & Electricity Holding Group.

Yongcheng defaulted on a CNY 1bn bond on 10 November - a few weeks after its latest round of debt sales, sending shockwaves through the country’s corporate bond market.

South Korea’s Kospi was 0.24% firmer at 2,533.50, while the Hang Seng Index in Hong Kong advanced 0.36% to 26,451.54.

The blue-chip technology stocks were mixed in Seoul, with Samsung Electronics up 0.15% while SK Hynix down 1.43%.

Oil prices were higher as the region entered the weekend, with Brent crude last up 1% at $44.64 per barrel, and West Texas Intermediate ahead 0.84% at $42.25.

Sentiment was mixed at the start of the Asian session, following a lukewarm session on Wall Street as investors digested the latest positive news on potential Covid-19 vaccines from the likes of AstraZeneca, Moderna and Pfizer.

That was being weighed against the astounding rise in coronavirus cases in the United States, which had seen daily case records broken repeatedly in recent weeks, with fresh social restrictions being implemented in some parts of the country.

In Australia, the S&P/ASX 200 was down 0.12% at 6,539.20, as the energy and materials sectors outweighed a 0.22% rise for the hefty financials subindex.

The major banks were mixed in Sydney, however, with Australia and New Zealand Banking Group down 0.49%, while Commonwealth Bank of Australia rose 1.43%, National Australia Bank added 0.13%, and Westpac Banking Corporation managed gains of 0.05%.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 was 0.92% weaker at 12,441.81, as medical device manufacturer Fisher & Paykel Healthcare fell 2.33%.

Retirement property developer Ryman Healthcare also added to its losses from the previous session, falling 2.45% by the end of trading in Wellington.

The down under dollars were stronger on the greenback, with the Aussie last ahead 0.2% at AUD 1.3702, and the Kiwi strengthening 0.31% to NZD 1.4409.