Asia report: Most markets rise, RBNZ stands pat at last minute
Most markets in the Asia-Pacific region were in the green on Wednesday, with New Zealand’s bourse in the green after the central bank there went against previous expectations to stand pat on interest rates.
In Japan, the Nikkei 225 was up 0.59% at 27,585.91, as the yen weakened 0.04% against the dollar to last trade at JPY 109.64.
Of the major components on the benchmark index, automation specialist Fanuc was up 0.8%, fashion firm Fast Retailing added 0.89%, and technology conglomerate SoftBank Group was 0.75% higher.
The broader Topix index was ahead 0.44% by the end of trading in Tokyo, settling at 1,923.97, after the Covid-19 emergency status in the city and surrounds was extended to 12 September.
Data out of Japan showed export growth slowing to 37% year-on-year in July, from 48.6% in June, slightly below consensus expectations for growth of 39.4%.
“Year-on-year growth was always going to slow, due to the unfavourable base effects,” said Pantheon Macroeconomics chief Asia economist Freya Beamish.
“But exports dipped 0.9% month-on-month in July, after a rise of just 0.9% in June, showing that exports are flattening off.
“Japanese exports tend to lag developments in the rest of north-east Asia, so the plateauing comes as no surprise.”
Beamish said exports to Europe were the major drag, but exports to China fell as well, while exports to the United States flatlined after a strong spell, with the ASEAN economies of southeast Asia the bright spot.
“Softening commodity prices likely were a big part of the story, with the value of exports of raw materials plunging, and chemicals exports dropping too.
“It wasn’t all about commodities, however; machinery exports also fell back, marking the second decline in three months,” Beamish explained.
“We continue to be worried about trade as the global economy shifts to the services part of the recovery, and demand for goods to adapt to the new normal slows due to saturation, despite the ongoing threat from ‘Delta’.”
On the mainland, the Shanghai Composite jumped 1.11% to 3,485.29, while the smaller, technology-heavy Shenzhen Composite added 0.84% to 2,412.49.
South Korea’s Kospi gained 0.5% to 3,158.93, while the Hang Seng Index in Hong Kong was 0.47% firmer at 25,867.01.
The blue-chip technology stocks were mixed in Seoul, with Samsung Electronics down 0.4%, while SK Hynix jumped 2.46%.
Oil prices were higher at the end of the Asian day, with Brent crude last up 0.83% at $69.60 per barrel, and West Texas Intermediate rising 0.72% to $67.07.
In Australia, the S&P/ASX 200 was the region’s odd one out, slipping 0.12% to 7,502.10, although the hefty financials subindex was ahead 0.69% by the close in Sydney.
The ‘big four’ banks were all in positive territory, with Australia and New Zealand Banking Group up 0.18%, Commonwealth Bank of Australia ahead 0.78%, National Australia Bank rising 0.66%, and Westpac Banking Corporation adding 1.41%.
All four have subsidiaries in New Zealand which operate as major players in that country’s lending market, leaving them susceptible to any changes in interest rates on the other side of ‘the ditch’.
Westpac was particularly strong after Goldman Sachs lifted its price target on the bank, and suggested it could announce a share buyback of AUD 5bn with its full-year results later in 2021.
Across the Tasman Sea, New Zealand’s S&P/NZX 50 rose 0.66% to 12,718.88, after the Reserve Bank of New Zealand said it would keep its official cash rate unchanged at the current, record low 0.25%.
New Zealand was widely expected to be the first developed economy in the region to take its foot off the pandemic monetary-easing gas pedal ahead of Wednesday’s decision, after going much of the last year coronavirus-free, with a buoyant economy.
Prime minister Jacinda Ardern plunged the country back into the hardest lockdown restrictions for the first time in more than 12 months on the eve of the central bank’s decision, however, after a case of the ‘Delta’ variant was discovered in the country’s largest city, Auckland, with no apparent link to the mostly-closed border.
Another 10 cases were discovered in the community on Wednesday as almost all New Zealanders were ordered to stay at home.
The Reserve Bank said its decision to hold its policy steady was “made in the context” of the fresh and sudden lockdown.
“The RBNZ postponed its first interest rate hike, after the country moved into lockdown following a number of cases of Covid-19 were detected, the first such in six months,” said Markets.com chief market analyst Neil Wilson.
“A policy of ‘zero Covid’ seems unsustainable in the long run, but the regime is set on this hard-line path.
“The RBNZ is set to hike still, but if there are ongoing intermittent lockdowns it could be delayed again, though [RBNZ] governor [Adrian] Orr said the country is going to face rolling periods of Covid-19 disruption and can handle it.”
Both of the down under dollars were weaker against the greenback, with the Aussie last off 0.03% at AUD 1.3786, and the Kiwi retreating 0.18% to NZD 1.4477.