Some Asian Markets Bounce Back, But Global Outlook Weighs

It was a mixed day for stock investors in China and other parts of the Asia-Pacific region on Tuesday.

Shares rose slightly on markets in mainland China but dropped in Hong Kong, while Japan, Seoul and Sydney bounced back after several days of falls. Markets in India were closed for a public holiday.

Equities in Philippines and Malaysia dropped 0.2% and 0.3% respectively, while stocks in Indonesia added 0.9%.

Investor confidence remained weak in China, even after state fund Central Huijin bought exchange-traded funds (ETFs) to bolster the flagging market.

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More foreign outflows from China equities

China’s blue-chip CSI 300 Index closed up 0.4% but still hovered around 4-and-a-half-year lows, while Hong Kong’s Hang Seng Index lost 1.1%, hitting the lowest level in nearly 11 months.

The weakness comes amid China’s economic sluggishness, higher US yields and a fragile global sentiment on fears of the Israel-Hamas war escalating.

“There has been some irrational over-correction, as investors shrugged off China’s better-than-expected growth data,” analysts at Nanjing Securities wrote in a note.

Central Huijin, which makes equity investments on behalf of China’s central government, said it bought ETFs on Monday, and “will continue to increase holdings in future,” after blue-chip stocks hit lows last seen in since February 2019.

“There should be a rebound after the move,” said Pang Xichun, research director at Nanjing RiskHunt Investment Management, but pointed out that investors still need to monitor foreign outflows.

Foreign investors sold a net 5 billion yuan ($684 million) of Chinese shares via the Stock Connect on Tuesday, amid outflows from Chinese equities at a record speed in recent months.

Shares in securities brokers jumped 3.2% to lead gains, while semiconductors and non-ferrous metal added 1.9% each. Hong Kong’s Hang Seng Tech Index lost 1.1%.

Yang Delong, chief economist at First Seafront Fund Management, said the market and the economy needed “stronger stimulus measures.”

And China looks set to get that, with three sources telling Reuters that the Parliament is set to approve just over 1 trillion yuan in additional sovereign debt issuance on Tuesday or Wednesday.

Nikkei edges back up

Meanwhile, Japan’s Nikkei share average snapped three consecutive sessions of declines on Tuesday in a volatile session, as investors scooped up beaten down stocks on dips.

The Nikkei rose 0.2% to close at 31,062.35, after falling as much as 1.4% earlier in the session.

The Nikkei opened 0.5% higher but reversed course as shares of Nidec tanked after the electric motor maker retained its annual profit outlook despite higher quarterly earnings.

“As the Nikkei fell below 31,000, investors turned cautions that shares were oversold, and they scooped up stocks,” Shoichi Arisawa, general manager of the investment research department at IwaiCosmo Securities, said.

“But the market overall had no clear directions amid uncertainties outside Japan,” Arisawa said.

US Treasury yields weighed on sentiment as the 10-year yield rose above 5% overnight to hit the July 2007 milestone. There were also sorries that the Israel-Hamas war could spread wider in the oil-exporting region.

Japan’s 10-year bond yield rose in early trade but retreated after the Bank of Japan announced an emergency bond buying.

Uniqlo brand owner Fast Retailing rose 1.74% to be the biggest boost for the Nikkei, while tech start-up investor SoftBank Group gained 1.68%, and chip-equipment maker Advantest cut early losses to end 0.63% higher.

Nidec tumbled 10.5% to become the worst performer on the Nikkei, with some analysts saying the unchanged profit outlook of 220 billion yen ($1.47 billion) for the year to March 2024 came short of market consensus.

The broader Topix inched up 0.09% to 2,240.73 after touching its lowest since June 8.

Korean shares also bounce

South Korean shares ended more than 1% higher on Tuesday, snapping a three-session losing streak, as investors snapped up stocks that fell recently on high bond yields.

The benchmark KOSPI closed up 26.49 points, or 1.12%, at 2,383.51. At one point during the session, the KOSPI fell 1.29% and touched its lowest level since January 9.

South Korea’s economic growth likely weakened in the third quarter, as high borrowing costs weighed on consumer spending and exports recovered at a slow pace, a Reuters survey showed.

“The market rebounded on perception that it was near the bottom, with over-sold stocks gaining sharply,” said Cho Jun-kee, an analyst at SK Securities.

Growth stocks, which are seen more sensitive to high bond yields, jumped. Samsung Biologics and Celltrion surged 5.43% and 6.76%, respectively, while search engine Naver and instant messenger Kakao ended up more than 4% each.

Among other index heavyweights, chipmakers rose, while battery manufacturers also recouped early losses to end higher. Automakers fell, however.

Commodity stocks lift Sydney’s ASX

Australian shares snapped a three-day losing streak to end higher on Tuesday, reflecting strength from miners and energy companies, which offset a drag in healthcare and consumer stocks.

The S&P/ASX 200 index ended 0.2% higher at 6,856.9 points after rising as much as 0.5% earlier in the session.

The benchmark recovered from a one-year low hit on Monday. Miners emerged as top gainers, ending the day 1% higher on a rebound in iron-ore prices.

Mining behemoths BHP Group, Rio Tinto and Fortescue Metals added between 0.5% and 2.6%.

Energy stocks, which have climbed in the past week on worries over oil supply, resumed the rally as underlying prices recovered some lost ground. Oil and gas major Santos climbed 0.6%.

Banks were also major gainers on the benchmark, ending the day 0.1% up, with the “Big Four” banks trading in the green. Asset manager Macquarie Group advanced 0.6%.

Shares of rare earths giant Lynas ended the day 12.4% higher after the Malaysian government said it will allow the company to import raw materials that contain natural radioactive material until March 2026.

Asian currencies edge higher

The Thai baht and South Korean won led sharp gains among Asian currencies on Tuesday, as a pull-back in the benchmark 10-year US Treasury yield improved sentiment while investors awaited economic data from the US later in the week.

In Asian hours, the yield on the benchmark 10-year US Treasury note was up 1 basis point to 4.848% on Tuesday.

Yields slumped amid volatility on the back of expectations that the US Fed will keep rates higher for longer than anticipated.

“Overnight softening of the greenback is poised to offer respite to Asian currencies, particularly those that plummeted past last year’s lowest values,” Philip Wee, senior FX strategist at DBS Group, said.

The baht was the top gainer, rising 1% and hovering near its highest level since September 22.

Thailand’s currency has been one of the worst performers in 2023 and has fallen 4.5% this year, but it has gained 0.7% in October, as the new Srettha government gets more active.

South Korea’s won was also one of the top gainers against a falling dollar, touching its highest since October 12.

A Maybank analyst saw a potential for the USD/KRW pair to consolidate around the 1325 to 1375 range.

South Korea’s key policy rate is at a near 15-year high of 3.5%, with the central bank last week standing pat for the sixth meeting. South Korea will report its advance estimates for third-quarter GDP on Thursday.

The Indonesian rupiah gained about 0.3% against the dollar, snapping a four-day losing streak.

Indonesia’s President Joko Widodo said the rupiah’s recent rate of depreciation against the dollar was still “safe” for Southeast Asia’s largest economy and its inflation targets.

Bank Indonesia unexpectedly raised interest rates last week to arrest the rupiah’s decline amid US monetary tightening and rising geopolitical risks.