Chinese stocks outperform as rest of Asia see dismal start to Q2
Chinese stocks outperform as rest of Asia see dismal start to Q2 ·CNBC
CNBC
On the first trading day of the second quarter, Chinese shares outperform the region as data suggesting a sluggish economy fueled hopes of more monetary stimulus measures.
China's official March manufacturing purchasing manager's index (PMI) unexpectedly edged up to 50.1 in March from February's 49.9, a tad above the 50-mark that that separates growth from contraction. The reading is better than the March HSBC final PMI, also released Wednesday, which showed the nation's vast manufacturing sector in contraction. The 49.6 final print, however, is stronger than the preliminary figure of 49.2.
Wednesday also sees a weaker-than-expected reading of sentiment among Japanese corporates. The headline big manufacturers index remained unchanged from the previous quarter at +12, below expectations for a reading of +14 in a Reuters poll, the Bank of Japan's Tankan survey showed.
Wall Street set the cautious mood by closing lower overnight, as investors eyed mixed economic data and the end of the first quarter. The Dow Jones Industrial Average closed down 1.1 percent and was the only index to decline during the January-March period. The S&P 500 index and tech-heavy Nasdaq lost 0.9 percent each in the previous session, but managed to post gains of 3.48 and 0.44 percent last quarter.
Shanghai Comp up 1.7%
China's Shanghai Composite index rallied as fresh PMI data revealing persisting weakness in the country's manufacturing sector added to hopes of further policy support.
"The government is a little concerned about the rapid run-up of equity markets, but their top agenda is to stabilize [the] economy so they cannot avoid more policy easing. The rally is also partly due to markets pricing in [expectations of] policy easing," Zhang Zhiwei, chief economist and head of equity strategy at Deutsche Bank, told CNBC Asia's "Squawk Box."
CLSA agrees: "Second quarter will be a much better quarter as the government will be more aggressive in supporting the economy. We expect the interest rate cut as early as April," Francis Cheung, head of China & Hong Kong strategy at CLSA, said.
In the previous session, the benchmark index rallied to a seven-year intra-day high of 3,835 points before closing down due to profit-taking, as Beijing unveiled further tax breaks and relaxed lending rules late Monday. The new policy changes follow three monetary stimulus injections by the People's Bank of China (PBoC) since November 2014.
Among the most active stocks, big lenders like Agricultural Bank of China (Shanghai Stock Exchange: 1288-SZ) and Industrial and Commercial Bank of China (Shanghai Stock Exchange: 1398-SZ) added 0.5 and 0.8 percent each, while China Everbright Bank (Shanghai Stock Exchange: 1818-SZ) rallied 2.1 percent.
Dongfeng Motor (Hong Kong Stock Exchange: 489-HK) surged by the daily maximum allowable 10 percent on news that its subsidiary, Dongfeng Hongtai, signed an agreement with French car-parts maker Faurecia (Euronext Paris: EO-FR) to create a joint venture. Fellow automakers also rose; SAIC Motor (Shanghai Stock Exchange: 104-SZ) and Guangzhou Auto leaped 3.8 and 2.4 percent each.
In Hong Kong, the Hang Seng (Hong Kong Stock Exchange: .HSI) index rose 0.7 percent.
Nikkei falls 0.9%
Japan's Nikkei 225 finished just above the 19,000 mark, near a three-week intraday low of 18,927 points, as investors locked in profits following a weak reading on the BOJ's Tankan survey.
The yen (Exchange:JPY=), last quoted at 119.87 in the afternoon session, remained on a downtrend. Geoff Kendrick, head of Asia FX & Rates Strategy at Morgan Stanley, noted that the Japanese currency could start trading more like a "normal asset currency" from now on.
"In the medium term, Japan's economy is improving so the Bank of Japan won't do more easing. Dollar-yen may drift higher through the year but will be held around these levels," he told CNBC's "Street Signs Asia."
Exporters were lower across the board; major carmakers like Toyota Motor (Tokyo Stock Exchange: 7203.T-JP) and Nissan (Tokyo Stock Exchange: 7201.T-JP) sagged 1.8 and 2 percent each, while other blue-chips like Canon (Tokyo Stock Exchange: 7751.T-JP) and Mitsubishi Electric (Tokyo Stock Exchange: 6503.T-JP) eased 1.7 and 0.6 percent, respectively.
Australia's S&P ASX 200 index was stung by steep losses in the resources sector.
As the steel-making raw material languished at a decade-low of $51 a tonne, BHP Billiton and Fortescue Metals (ASX:FMG-AU) tanked 2.2 and 3.3 percent, respectively, while junior players like BC Iron (ASX:BCI-AU) closed down 2.7 percent. Oil-related counters also came under pressure on persistently low energy prices; Santos (ASX:STO-AU) and Oil Search (ASX:OSH-AU) slumped nearly 3 percent each.
Bucking the downtrend, Macquarie Group (ASX:MQG-AU) and Telstra elevated 1.2 and 0.3 percent, respectively, providing some relief to the bourse.
Kospi loses 0.6%
South Korea's Kospi index retreated after heavyweights such as Hyundai Motor, KB Financial Group (Korea Stock Exchange: 556-KR) and Samsung Electronics made losses between 1.8 and 2.7 percent.
Steelmaker Posco (Korea Stock Exchange: 549-KR) closed down 2.7 percent to its lowest levels in more than six years following media reports that Warren Buffet's Berkshire Hathaway (BRK-A) had sold its entire stake in the company.
Weaker-than-expected domestic data also damped sentiment for the day. The country's manufacturing activity and new export orders contracted in March, according to the HSBC/Markit purchasing managers' index (PMI), indicating further signs of a struggling recovery in South Korea. Meanwhile, house prices rose by 0.4 percent in the same month, faster than a 0.23 percent gain in February, data from the country's top mortgage lender Kookmin Bank showed.
- CNBC's John Phillips, Li Anne Wong contributed to this market report
