Asia report: Stocks mixed, manufacturing data in focus

(Sharecast News) - Asia-Pacific markets displayed a mixed performance on Friday, deviating from Wall Street's predominantly positive trend overnight, as investors digested varied economic data from the region. A key point for market participants was China's Caixin manufacturing purchasing managers' index (PMI) for November, which unexpectedly revealed an expansion in the sector.

Patrick Munnelly at TickMill Group said the region's stocks had a relatively subdued start to the new month as markets took a pause following the November rally.

"Economic releases and geopolitical developments, including the resumption of the conflict in Gaza, kept investors engaged.

"The Nikkei 225 index in Japan traded without a clear direction

"Positive data releases, such as a lower unemployment rate, offset the negative impact of a strong currency."

Munnelly noted that the Hang Seng and Shanghai Composite indices faced gradual pressure, partly attributed to the People's Bank of China's significant liquidity drain.

"Despite the unexpected expansion of the Caixin manufacturing PMI, these indices failed to gain significant traction.

"Overall, the day's trading reflected a cautious sentiment, with markets taking a breather after the previous month's upward momentum, while economic indicators and geopolitical factors played a role in shaping regional market dynamics."

Equity markets in a mixed state across the region

In Japan, the Nikkei 225 edged down by 0.17% to close at 33,431.51 points, while the Topix index managed to gain 0.32%, reaching 2,382.52 points.

The losses on Tokyo's benchmark were led by Rakuten, slipping 4.39%; Taiyo Yuden, declining by 3.63%; and CyberAgent, losing 3.11%.

China's markets saw a mixed performance, with the Shanghai Composite edging up by 0.07% to settle at 3,031.64 points, while the Shenzhen Component dipped slightly by 0.07%, closing at 9,720.57 points.

China Hi-Tech Group and Dalian Sunasia Tourism were leading the gains in Shanghai, both surging by 10.02%.

Hong Kong's Hang Seng Index faced a decline of 1.25%, concluding at 16,830.30 points.

The market was led lower by stocks, including Zhongsheng Group, which saw a 6.1% drop, New World Development, with a 4.3% decrease, and Haidilao International, down 4.25%.

South Korea's Kospi index slipped by 1.19% to settle at 2,505.01 points, with notable losses in SK Innovation, down 6.08%, and LG Energy Solution, which declined by 5.72%.

Australia's S&P/ASX 200 experienced a minor setback, falling by 0.2% to 7,073.20 points.

Among the big decliners in Sydney were Lynas Rare Earths, which saw a 4.08% decrease, and EVT, down 3.94%.

Across the Tasman Sea, New Zealand's S&P/NZX 50 index bucked the trend, gaining 0.33% to close at 11,367.51 points.

Standout performers in Wellington included Restaurant Brands New Zealand, which surged by 5.4%, and Eroad, posting a 2.47% gain.

In currency markets, the dollar was last down 0.32% on the yen to trade at JPY 147.73, while it decreased 0.39% against the Aussie to AUD 1.5080.

The greenback was also weaker on the Kiwi, last retreating 0.44% to change hands at NZD 1.6176.

On the oil front, Brent crude futures were last down 0.37% on ICE at $80.56 per barrel, while the NYMEX quote for West Texas Intermediate was 0.38% lower at $75.67.

Manufacturing data in focus with upside surprise from China

In economic news, China's manufacturing sector unexpectedly expanded in November.

The Caixin purchasing managers' index (PMI) rose to 50.7 last month, marking a significant improvement from October's 49.5, primarily due to an increase in new orders.

November's PMI recorded the fastest expansion in three months and surpassed Reuters poll estimates of 49.8.

The report highlighted that while the rate of new order growth was modest, it was the most robust since June.

However, the survey noted a slight decline in new overseas work, emphasising the challenging external demand environment.

A PMI reading above 50 indicates growth, while one below signals contraction.

"The December central economic work conference is likely to prioritise rebalancing and high-quality growth over sheer growth, with the target growth rate probably remaining unchanged, at 'about 5%'," said Duncan Wrigley at Pantheon Macroeconomics.

"Policymakers are determined to reduce the reliance of the economy on the residential property sector while boosting the size of advanced manufacturing.

"Priorities for next year should include reducing financial risks stemming from developer and local government debt."

Wrigley said China would likely rely on fiscal stimulus, mainly via fixed asset investment, to stabilise growth.

"Don't expect a major consumption stimulus, given policymakers' wariness about encouraging welfarism and laziness."

On the other hand, Japan saw its factory activity contract for the sixth consecutive month in November due to declining domestic and international demand, according to a private survey.

The final au Jibun Bank Japan manufacturing PMI fell to 48.3 last month, a slight decrease from October's 48.7 but marginally better than the initial reading of 48.1.

In contrast, Japan's October unemployment rate declined to 2.5% from the previous month's 2.6%, slightly below Reuters poll forecasts of 2.6%.

"Japan's reopening recovery shows few signs of broadening out from the buoyant tourism sector, and is unlikely to rebound ahead of cooling global activity," Pantheon's Duncan Wrigley noted.

"Domestic demand has not entered a self-sustaining expansion cycle yet, while cost pressures remain high, as a result of input costs and the weak yen."

In South Korea, a 17-month contraction streak in factory activity came to a halt in November, according to private surveys conducted by S&P Global.

The country's manufacturing PMI reached exactly 50, indicating unchanged operating conditions for the sector.

S&P reported that output levels broadly stabilised during the month, leading to increased staffing and purchasing activity by manufacturers.

However, the survey also pointed out a more subdued outlook for the coming year, as firms expressed the weakest degree of optimism in five months, citing concerns over sustained economic weakness.

"Firms are still optimistic about the 12-month outlook, but less so than before due to the prolonged period of weak domestic and global economic activity," Duncan Wrigley at Pantheon Macroeconomics said.

"The future output index fell 2.6 points to 53.3, while the employment index dipped 0.9 points to 50.5.

"Some respondents said they were hiring to fill vacancies, rather than to meet higher workloads."

Finally on data, India's manufacturing activity rebounded from an eight-month low in November to achieve a faster rate of expansion, according to S&P Global.

The country's manufacturing PMI registered at 56.0 in November, aligning with Reuters forecasts and surpassing the 55.5 recorded in October.

S&P highlighted that easing price pressures played a significant role in the improvement, noting that although average purchasing costs increased, the inflation rate eased to its lowest level in the current 40-month sequence of increases, remaining negligible by historical standards.

Reporting by Josh White for Sharecast.com.