Asia report: Markets mixed as RBA keeps rates at record low

Markets in Asia finished in a mixed state on Tuesday, with stocks in China in the green once more, as Australia’s central bank stood pat on its monetary policy.

In Japan, the Nikkei 225 was down 0.44% at 22,614.69, as the yen weakened 0.34% against the greenback to last trade at JPY 107.72.

Technology giant SoftBank Group soared 4.6%, while among the benchmark’s other major components, robotics specialist Fanuc was down 0.59% and Uniqlo owner Fast Retailing lost 1.53%.

The broader Topix index ended its session off 0.34% in Tokyo, closing at 1,571.71.

On the mainland, the Shanghai Composite managed gains of 0.37% to 3,345.34, and the smaller, technology-centric Shenzhen Composite was 1.71% firmer at 2,157.94.

The gains in China came after a bumper Monday for stocks there, which saw the Shanghai index soar almost 6%.

Those moves came after the state-backed China Securities Journal said investors should be anticipating the “wealth effect of the capital markets”, suggesting they were in for a “healthy bull market”.

In fresh data out of Beijing on Tuesday, China’s foreign reserves rose for a third consecutive month in June, to $3,112bn - up from $3,102bn in May, and just shy of consensus expectations for $3,119bn.

Miguel Chanco, senior Asia economist at Pantheon Macroeconomics, said the consensus looked high, despite the still-sturdy and positive currency valuation effects.

“This accounted for essentially all of the increase in reserves last month, though they continued to be narrowly driven, with euro-denominated holdings making up a bit over 70% of the lift,” he said.

“Meanwhile, yields on US treasuries were broadly unchanged compared to May, leaving aside their volatility in the first half of June.”

Chanco said that if his expectations were right, and the trade surplus fell sharply to around $40bn in June, from $63bn in May, then capital outflows “probably eased” by roughly the same amount last month, after jumping in May in the wake of renewed US-China tensions over Hong Kong.

“Foreign exchange intervention by the People’s Bank of China last month was trivial, if any, with the renminbi recouping its losses against the dollar in May.

“Support for the currency from the trade balance is likely to diminish going forward, with the surplus set to narrow steadily.

“But the current account is likely to remain in the black, as the services shortfall should remain depressed, due to the sorry state of the global travel industry.”

Chanco also noted that the People’s Bank was unlikely to reduce its benchmark interest rates further in the second half, which should keep capital outflows in check.

South Korea’s Kospi fell 1.09% to 2,164.17, while the Hang Seng Index in Hong Kong was 1.38% weaker at 25,975.66.

Both of the blue-chip technology stocks were in the red in Seoul, with Samsung Electronics down 2.91% and chipmaker SK Hynix losing 1.4%.

Oil prices were lower at the end of the Asian day, with Brent crude last down 1.09% at $42.63 per barrel, and West Texas Intermediate off 1.38% at $40.07.

In Australia, the S&P/ASX 200 slipped 0.03% to 6,012.90, as central bankers in the sunburnt country kept their current policy settings on hold.

The Reserve Bank of Australia kept the country’s cash rate at its record low 0.25%, where it has stayed since the beginnings of the coronavirus pandemic in March.

“The outlook remains uncertain and the recovery is expected to be bumpy and will depend upon containment of the virus,” said the bank’s governor Philip Lowe.

“[The] worst of the global economic contraction has now passed,” he noted, pointing to a recent improvement in a number of economic indicators.

Australia’s big four banks were all weaker in the wake of the announcement, with Australia and New Zealand Banking Group down 1.62%, Commonwealth Bank of Australia off 0.25%, National Australia Bank losing 1.93%, and Westpac Banking Corporation in the red by 1.57%.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 rose 0.75% to 11,743.73, led higher by rubber group Skellerup, which was ahead 3.8%.

Both of the down under dollars were weaker on the greenback, with the Aussie last off 0.61% at AUD 1.4429, and the Kiwi retreating 0.41% to NZD 1.5318.