Asian Market Update – Thursday: Asian equities mixed on positive economic data from the US, geopolitical tensions

This article was posted on Thursday, 10:42, UTC.

The Big Question: What matters more for Asian investors: Events in the region or in the US?

Major equity markets in the Asia Pacific were in a mixed mode on Thursday, with stock indexes in Japan and Australia making gains on better-than-expected economic data out of the US, while stocks in China and South Korea seeing losses over geopolitical tensions, despite positive manufacturing data in China.

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In Japan, the Nikkei 225 edged up 0.7 percent or 136.22 points to 19,642.76 before midday.

Down under, the ASX 200 added 0.77 percent or 43.9 points to 5,713.6.

The gain in Japan and Australia, which closely track their counterparts in the US, followed gains on Wall Street, where the S&P 500 gained 0.46 percent and the Dow rose 0.12 percent.

The US reported 3 percent economic growth, beating the expected pace of 2.7 percent. Also, the private sector added 237,000 jobs, well above the expected 185,000 jobs.

However, other factors weighed on markets in South Korea and Greater China.

In South Korea, the KOSPI fell 0.35 percent to 2,364.08 before midday. Tensions in the Korean Peninsula showed sign of escalation again on Wednesday, after US President Donald Trump suggested that the US won’t pursue diplomatic talks with North Korea.

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In his first response to the latest missile test by North Korea via Twitter, Trump said: “The US has been talking to North Korea, and paying them extortion money, for 25 years. Talking is not the answer!”

Investors could see that as a sign of the US not actively pursuing a diplomatic solution, and tensions might rise if the US were to pursue tougher actions; however, analysts also suggest investors are quick to adopt to the tension in the Peninsula because it’s been a persistent situation for years.

Meanwhile, in Greater China, despite better-than-expected performance in the country’s manufacturing sector, stocks continued lower. The Shanghai Composite Index was 0.61 percent lower before midday to 3,342.95.

China’s official manufacturing PMI, a closely watched gauge of manufacturing activity, rose 0.3 percentage point in August to 51.7 percent, while non-manufacturing (services) PMI was down 1.1 percentage points to 53.4 percent. Both remained above the 50-point threshold, indicating expansion in activities.

The response from the equity markets to the positive data highlighted once again the question: Is China’s stock market out of touch with economic fundamentals?

In Hong Kong, the Hang Seng also lost 0.64 percent to 27,914.21. Share prices of major mainland banks likely weighed on the benchmark. Despite positive earnings reports, major bank shares in Hong Kong fell, with ICBC, the world’s largest bank by total assets, seeing its shares down as much as 3.32 percent, and Bank of China’s shares down 1.21 percent.

Market-sensitive news this week to watch: More economic data from the US, Japan; NAFTA talks; UK’s Brexit talks with the EU; talks of tax reform in the US.

Main Market Movers – Mid-day Asian Trading Session

Indexes Value at Midday Daily Change
Japan-Nikkei Stock Average 225 19,642.76 0.7%
China-Shanghai Composite Index 3,342.95 -0.61%
Australia-ASX 200 5,713.60 0.77%
Hong Kong-Hang Seng 27,914.21 -0.64%
South Korea- KOSPI 2,364.08 -0.35%

Cryptocurrencies

The bitcoin price was up overnight during the Asian trading session, trading between $4,568 and $4,623.

Ethereum was up 0.58 percent, changing hands at $385 after taking a slight drop earlier to $380.

The rally came as more institutions are joining the blockchain revolution. The latest news say HSBC and Barclay are joining a settlement coin using blockchain.

Currencies

The Japanese yen lost 0.29 percent against the US dollar to 110.54 per dollar, after the dollar turned up following better economic data in the US and talks of tax reform.

The economic data also lifted the dollar against the Chinese yuan. The yuan lost 0.07 percent against the greenback, trading at 6.5962 per dollar.

The Australian dollar, which is often sensitive to Chinese economic data, firmed 0.06 percent against the US dollar. The Australian dollar was trading 0.7904 per dollar.

Commodities

WTI Oil was down 0.07 percent at $45.91 per barrel.

Brent Crude gained 0.26 percent to $50.74 per barrel.

Gold was down 0.36 percent to $1,303 an ounce.

Business News across Asia

In China, The BRICS summit kicks off on Thursday in Xiamen, South China’s Fujian Province. BRICS stands for five emerging economies: Brazil, Russia, India, China and South Africa. The bloc holds a meeting each year to talk about intra-cooperation as well as raising their influence in the global economic system. This year Egypt, Kenya and Mexico are also invited to participate at the summit.

Take away: A lot to watch for during the Summit, including their voice in a turbulent global economic system, China-India talks following a lengthy border military stand-off that just ended before the Summit, deals on infrastructure, building a common customs network, etc.

In Japan, UK Prime Minister Theresa May is in Japan to hold talks with her Japanese counterpart Prime Minister Shinzo Abe about a potential bilateral trade agreement following the UK’s exit from the EU. No details of substance have emerged from the talks, which is being held almost simultaneously with divorce talks between British and EU officials in Brussels.

Take Away: May’s intention to expedite talks with Japan is quite telling, coming at a time when British and EU officials are making slow progress in what could be very consequential negotiations. If things are good with Japan, that could improve the UK’s position in the EU talks.

Featured image from Pixabay.

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