Asia report: Stocks join global sell-off as Chinese exports fall again

(Sharecast News) - Asia-Pacific equity markets closed in the red across the board on Thursday, following a sell-off on Wall Street overnight. Fresh trade data out of China and Australia was also in focus for the region's market participants.

"Asian equity markets faced headwinds as they followed the negative lead from the US, where both stocks and bonds retreated in response to hawkish ISM services data," said TickMill market analyst Patrick Munnelly.

"Additionally, market participants analysed the latest Chinese trade figures.

"The Nikkei 225 index experienced a turbulent day, initially benefiting from a weaker currency and optimistic reports regarding the Japanese government's plans to implement economic measures in October."

However, as the trading session unfolded, the index succumbed to selling pressure, Munnelly noted.

"In line with the downbeat sentiment, the Hang Seng index and the Shanghai Composite both declined circa 1%.

"Chinese trade data revealed a persistent contraction in both exports and imports, although it didn't reach the dire levels initially anticipated.

"Concurrently, the tech sector faced mounting pressure, triggered by tensions following the FCC chair's call for US government agencies to address the threat posed by Chinese cellular connectivity modules."

Munnelly also said that a lawmaker's request for an investigation into SMIC, citing potential violations of US sanctions by supplying components to Huawei, further weighed on the sector.

"Furthermore, China made headlines by reportedly banning government officials from using iPhones at work and expressing intentions to expand this restriction to state-owned enterprises and government agencies, adding to the overall geopolitical complexities affecting the market."

Bourses fall across the region amid global sell-off

In Japan, the benchmark Nikkei 225 faced a drop of 0.75%, closing at 32,991.08 points, while the Topix index was down 0.38%, finishing at 2,383.38.

Significant decliners on Tokyo's benchmark included Advantest which slumped 6.63%, Oki Electric Industry which saw a 5.64% drop, and NTN which went down by 5.41%.

Over in China, the major indexes also followed a downward trend, as the Shanghai Composite decreased by 1.13% to stand at 3,122.35, and the Shenzhen Component took a more significant hit, dropping by 1.84% to 10,321.44.

Stocks like GEN S Power Group plummeted 9.88%, while AUPU Home Style faced a decline of 7.72%.

In Hong Kong, the Hang Seng Index closed 1.34% lower at 18,202.07.

Major decliners included Semiconductor Manufacturing International Corporation (SMIC), which fell by 7.6%, Sunny Optical Technology, which dropped 4.34%, and Alibaba Health Information Technology, which decreased 3.88%.

South Korea's Kospi didn't escape the region's bearish mood, dipping by 0.59% to close at 2,548.26.

Among the leading losers, LG Innotek and POSCO Future M faced significant declines, dropping by 6.13% and 5.82% respectively.

The Australian S&P/ASX 200 index was among the hardest hit in the region, witnessing a decline of 1.19% to end at 7,171.00.

Super Retail Group's shares took a blow, descending by 7.58%, followed closely by Air New Zealand, which experienced a 7.24% slump.

New Zealand's S&P/NZX 50 showed relative resilience, with a minimal decline of 0.01% to close at 11,426.84.

However, shares of Vista Group International and Pacific Edge in the country weren't as fortunate, recording declines of 4.52% and 3.96% respectively.

On the currency front, the dollar was last 0.16% weaker on the yen, trading at JPY 147.42.

The greenback remained flat on the Aussie at AUD 1.5669, while it slipped 0.19% against the Kiwi to change hands at NZD 1.6996.

Oil markets also reflected the broader sentiment, with Brent crude futures last down 0.55% on ICE to price at $90.10 per barrel, and the NYMEX quote for West Texas Intermediate dropping 0.65% to $86.97.

China's export decline continues amid supply chain issues; Australia's trade surplus shrinks

In economic news, China faced further challenges in August as its exports saw a decline for the fourth consecutive month.

This continued descent was attributed to weak global demand and ongoing supply chain problems, complicating China's recovery path from the pandemic's ramifications.

According to customs data, exports took a 8.8% dip year on year, totaling $284.9bn in August - a slight improvement from July's 14.5% plunge.

On the other hand, imports also decreased, falling 7.3% to $216.5bn, though it was a less steep decline than July's 12.4% drop and surpassed projections for an 8.2% fall.

As a result, China's trade surplus for August settled at $68.4bn, a reduction from July's $80.6bn.

"Overall, export conditions are likely to remain weak in the second half of this year on the back of slowing global demand for Chinese goods," said Kelvin Lam at Pantheon Macroeconomics.

"Indeed, export new orders of the official manufacturing PMI are still hovering well below 50, suggesting demand from overseas is shrinking at a fast pace.

"In addition, periods of sticky inflation have dented real wages in western economies while elevated levels of interest rates have reduced their purchasing power via higher debt servicing costs."

Lam said that, coupled with the fizzling out of the post-Covid spending spree, was resulting in weak demand for discretionary Chinese goods, bar vehicles.

"Long-run factors, such as off-shoring of supply chains and lower-value-added industries to neighbouring economies, due to less competitive wages in China and geopolitical factors, is also adding to the background of this declining trend.

"On policies, policymakers acknowledged that the recovery will be tortuous and bumpy this time around, however, they will stop short of deploying credit driven mega stimulus we have seen during the GFC.

"Instead, they will continue to refine the supply-side, with measures to promote quality growth strategically and sustainably."

Kelvin Lam added that the leverage problems on certain parts of the economy, namely the property and local government sectors, would hopefully be addressed soon.

Down under, Australia too grappled with its own economic concerns, as the country's trade surplus in July was recorded at AUD 8.04bn - a significant reduction from June's revised tally of AUD 10.27bn.

The figure fell short of the AUD 10bn surplus forecasted by economists in a Reuters poll.

A 2% monthly reduction in exports, primarily attributed to a drop in non-monetary gold, coupled with a 2.5% surge in imports, led predominantly by non-industrial transport equipment, were key contributors to the altered trade dynamics.

Reporting by Josh White for Sharecast.com.