Nikkei Rises, But Hang Seng Slips Ahead of US Inflation Data

Asian markets were mixed on Tuesday as investors awaited US inflation data for October later in the day.

Stocks in China were flat amid signs of renewed weakness, but shares in Japan, Korea and Australia rose, while markets in India were closed for a public holiday.

Japan’s Nikkei share average ended higher amid expectations that domestic firms would continue posting solid outlook, with the yen hovering near a three-decade low against the dollar.

The Nikkei rose 0.34% to close at 32,695.93, while the broader Topix gained 0.37% to 2,345.29.

“Japanese corporate earnings season has passed its peak and investors confirmed many companies raised their outlook,” said Shigetoshi Kamada, general manager at the research department at Tachibana Securities.

“And with the yen hovering close to 152 against the dollar, there is an expectation that Japanese firms would raise their profit outlook further.”

A softer yen tends to help exporters, as it increases the value of overseas profits in yen terms when firms repatriate them to Japan.

“The rise in today’s market already factored in a downtrend of US interest rates,” said Shuji Hosoi, senior strategist at Daiwa Securities. “Gains in US futures indicated that as well.”

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Stocks in China struggled for direction on Tuesday as lending data in October signalled soft credit demand, adding to signs that the recovery process in the world’s second-largest economy was still complicated.

The blue-chip CSI 300 Index was flat at 0.1%, while the Shanghai Composite Index gained 0.3% at market close. Hong Kong’s Hang Seng Index slipped 0.2% and the Hang Seng China Enterprises Index was down 0.4%.

Chinese banks extended 738.4 billion yuan ($101.3 billion) in new yuan loans in October, down from 2.31 trillion yuan in September, but exceeded analysts’ expectations.

“October’s credit and money data were mixed, but the composition of credit and loans data showed soft credit demand,” Goldman Sachs said in a note, adding they continue to expect another 10bps policy interest rate cut and 25bp RRR (reserve requirement ratio) cut before the end of this year.

Recent economic data showed more signs of renewed weakness, said Ting Lu, chief China economist at Nomura. “Export growth weakened again in October despite the lower base. CPI inflation dipped into negative territory again.”

“Growth stabilisation is not solid,” he said, adding that Beijing needs to take stronger action to rescue the property sector and clean up local government debt to secure a more sustainable recovery.

Market participants will focus on the talks between US President Joe Biden and Chinese President Xi Jinping on Wednesday November 15 to gauge sentiment between the world’s two biggest economies.

Investors will also be focusing on China’s retail sales and industrial output data for October, expected on Wednesday, to assess its economic recovery.

China’s yuan edged lower to 7.2945 per dollar, pressured by market expectations of a further widening of the yield differential in favour of the US, as investors bet on more monetary easing in the world’s second-largest economy.

Short-selling ban will remain, South Korea’s Yoon says

South Korean shares rose more than 1% on Tuesday, led by battery makers, as the country’s president reassured a short-selling ban would remain until fundamental improvements.

The benchmark KOSPI closed up 29.49 points, or 1.23%, at 2,433.25.

South Korean President Yoon Suk Yeol said a ban on short selling of shares would stay, as the practice becomes a hot political issue and defying warnings the move would make the $1.8 trillion equities market less transparent.

“Market focus was going to shift to fundamental and macroeconomic issues from short-selling this week, but the president’s comments came today, sending battery stocks higher,” said Cho Jun-kee, an analyst at SK Securities.

Australian shares a one-week high as miners rise

Australian shares closed on Tuesday at their highest levels in nearly one week as heavyweight miners tracked iron ore prices higher, while investors awaited key domestic data and the US inflation print.

The S&P/ASX 200 index closed 0.83% higher at 7,006.70 points, its highest level since November 9. The benchmark ended 0.4% lower on Monday.

Investors in Australia await wages and employment data due on November 15 and 16, respectively, which will help investors assess the central bank’s monetary policy trajectory at its upcoming meeting in December 5.

Also in focus was US inflation data due later in the day to gauge the chances of future rate hikes by the Federal Reserve.

The wages and employment data are expected to play a more significant role for the Australian market, compared with the US inflation data, said Steven Daghlian, a market analyst at CommSec.

“The hotter these indicators are, the worse it is going to be for the market by the tail-end of the week,” Daghlian added.

In Sydney, the benchmark index was boosted by the mining index, which jumped 1.53%. Sector heavyweights Rio Tinto and BHP Group rose 2% and 1.4%, respectively.

Energy stocks ended 2.5% higher, breaking an eight-day losing streak, aided by stronger global oil prices on expectations of a healthy market. Shares of Woodside Energy and Santos jumped 2.6% each.

Asian currencies slide

Most Asian currencies declined on Tuesday, while equities were mixed as investors remained wary of riskier Asian assets ahead of US inflation data.

The South Korean won and Thai baht retreated 0.7% and 0.4% respectively, while the Malaysian ringgit slipped 0.3%.

The Japanese yen was hovering near a one-year low against the greenback.

Shares in Malaysia rose by 0.5%, while markets in Thailand and Philippines were down 0.6% and 0.5%, respectively.

In the Philippines, all eyes are on the central bank’s monetary policy decision on Thursday. It has indicated that it is willing to take further action to contain consumer price expectations.

The Bangko Sentral ng Pilipinas (BSP) is expected to keep its key interest rate unchanged at 6.50% on Thursday, according to a Reuters poll of economists, after an off-cycle 25 basis point hike on October 26.

Markets in India were closed for a public holiday.