Asia report: Most markets fall as PBoC keeps key lending rates steady

(Sharecast News) - Markets in the Asia-Pacific region closed mostly lower on Friday as investors reacted to China's decision to keep key lending rates unchanged and Japan's release of higher-than-expected November inflation data. The People's Bank of China held its loan prime rates steady, while Japan reported core inflation exceeding forecasts, further complicating the economic outlook after the Bank of Japan maintained its ultra-loose monetary policy a day earlier.

"Asian markets were mixed to lower in an uneventful session overnight, with China opting to keep its loan prime rates unchanged and with an uptick in inflation in Japan after the central bank had previously chosen to keep its benchmark rate at 0.25%," said Interactive Investor head of markets Richard Hunter.

"Expectations remain that the Bank of Japan will tighten its monetary policy in the next couple of months, while China still has a hill to climb in convincing investors that the stimulus measures announced so far to revive its faltering economic recovery will begin to wash through next year."

Most markets fall after week of central bank decisions

In Japan, the Nikkei 225 fell 0.29% to close at 38,701.90, while the broader Topix lost 0.44% to end at 2,701.99.

Notable declines included Toppan Printing, down 7.29%, and Resona Holdings, which dropped 5.02%.

Chinese markets also edged lower, with the Shanghai Composite slipping 0.06% to 3,368.07 and the Shenzhen Component nearly flat, down 0.02% to 10,646.62.

Major losses were seen in Shanghai Phoenix Enterprise Group and Chengdu B-ray Media, both plunging by the daily limit of 10%.

Hong Kong's Hang Seng Index declined 0.16% to 19,720.70, weighed down by drops in Kuaishou Technology, down 5.42%, and China Shenhua Energy, which fell 3.46%.

South Korea's Kospi 100 recorded the steepest regional loss, dropping 1.24% to 2,397.31.

Heavyweights like Korea Zinc and Hanmi Semiconductor fell sharply, losing 7.04% and 6.01%.

Australia's S&P/ASX 200 hit a three-month low, shedding 1.24% to close at 8,067.00.

Biopharmaceutical company Mesoblast led losses with a steep 20.66% drop , while Siteminder and Wesfarmers each lost about 5%.

New Zealand bucked the regional trend, with the S&P/NZX 50 gaining 1.18% to 12,904.11.

Utility and infrastructure stocks performed well, led by Meridian Energy, up 5.38%, and Infratil, which rose 4.79%, benefiting from renewed interest in defensive sectors.

In currency markets, the dollar was last down 0.49% on the yen to trade at JPY 156.67, as it weakened 0.13% against the Kiwi to NZD 1.7736.

The greenback did, however, manage gains of 0.08% on the Aussie, changing hands at AUD 1.6042.

Oil prices fell, with Brent crude futures last down 1% on ICE to $72.15 per barrel, and the NYMEX quote for West Texas Intermediate falling 1.07% to $68.64.

PBoC maintains key lending rates, inflationary pressure persists in Japan

China's central bank maintained its key benchmark lending rates on Friday, signaling a cautious approach as it navigated the dual challenges of supporting economic growth and stabilising the yuan.

The People's Bank of China kept the one-year loan prime rate at 3.1% and the five-year rate at 3.6%, aligning with market expectations.

The one-year rate primarily impacts corporate and household loans, while the five-year rate serves as a reference for mortgages.

The decision followed a 25-basis-point rate cut by the US Federal Reserve earlier in the week, which also indicated a more limited pace of rate reductions in 2025 compared to earlier projections.

In economic news out of Japan, inflation data signaled persistent price pressures, potentially setting the stage for tighter monetary policy in the coming months.

The core-core inflation rate, excluding fresh food and energy prices, rose to 2.4% in November, marking a seven-month high.

Broader inflation measures also accelerated, with core inflation climbing to 2.7% from October's 2.3% and headline inflation reaching 2.9%, its highest level since August.

The uptick came amid ongoing scrutiny by the Bank of Japan, which may consider raising interest rates early next year to address sustained inflation.

Elsewhere, South Korea reported a notable rise in producer prices for November, reflecting growing cost pressures in the economy.

The producer price index increased by 1.4% year-on-year, the fastest pace since August, and reversed a month-on-month decline seen in October.

November's 0.1% month-on-month increase marked the first uptick since July, adding to concerns about rising input costs for businesses.

Reporting by Josh White for Sharecast.com.