Hang Seng Index, ASX 200, Nikkei 225 Index: Asia Faces Mixed Signals Amid Gloomy Chinese Forecasts

Key Insights:

• Hang Seng’s slide continues due to concerns over the Chinese real estate sector.
• Q3 manufacturing figures spotlight Japan’s economy.
• Investor caution looms ahead of Wednesday’s session, reflecting uncertainty around core inflation.

Overview of the Tuesday Session

The Hang Seng Index extended its losing streak to five sessions on Tuesday. Investor angst toward the Chinese real estate sector continued to weigh on broader investor appetite. However, the Nikkei and ASX 200 enjoyed a positive Tuesday session.

A September 4-11 Reuters poll of analysts in and outside mainland China projected the Chinese economy to grow by 5% in 2023, down from 5.5% in July. Forecasts are gloomier for 2024 and 2025. Analysts expect growth of 4.5% in 2024 and 4.3% in 2025, barring the rollout of a significant stimulus package to reboot the economy.

However, a stronger USD to JPY drove the buyer appetite for export stocks on the Nikkei. Economic indicators from Australia and iron ore prices gave the ASX 200 a boost.

Japan Manufacturing Sector Takes the Stage

BSI Large Manufacturing Conditions numbers for Q3 will draw interest early in the Asian session. Improving manufacturing sector activity should support sector-related stocks. However, the direction of the USD/JPY will likely have more impact on the Nikkei.

Producer prices also need consideration. Softer year-on-year numbers might signal a weakening in the demand environment. Economists forecast producer prices to rise by 3.2% year-over-year in August versus 3.6% in July.

While the numbers will influence the direction of the Nikkei, we don’t expect the numbers to affect BoJ monetary policy goals. On Tuesday, Hiroshige Seko cited his preference for an ultra-loose monetary policy stance. The ruling party lawmaker responded to BoJ Governor Ueda’s comments on the weekend about shifting away from negative rates.

US CPI Report to Hang Over the Asian Session

On Tuesday, the S&P 500 and Dow ended the day with losses of 0.57% and 0.05%, respectively. The NASDAQ Composite Index fell by 1.04%.

Bets on the Fed ending its interest rate tightening cycle may come under pressure today. Economists forecast the US annual inflation rate to accelerate from 3.2% to 3.6%. However, economists predict the core inflation rate to soften from 4.7% to 4.3%. The markets are betting on softer core inflation to garner the interest of the FOMC members.

Investors may take a more cautious approach toward the Wednesday session. Despite the optimism over a Fed pause, an unexpected spike in core inflation would refuel Fed rate hike bets and sink riskier assets.

ASX 200

The ASX 200 gained 0.20% on Tuesday. Mining stocks continued to make gains on an upswing in iron ore prices. However, disappointing consumer confidence and resilient business confidence delivered a mixed session.

The Westpac consumer sentiment index slid by 1.5%, while the NAB Business Confidence Index rose from +1 to +2.

Fortescue Metals Group (FMG) gained 1.68%. BHP Group Ltd (BHP) and Rio Tinto (RIO) ended the day up 1.21% and 1.52%, respectively. Newcrest Mining (NCM) bucked the trend, falling 0.31%.

The big four banks had a mixed session. ANZ Group (ANZ) slipped by 0.04%. However, The National Australia Bank (NAB) rose by 0.21%, with The Commonwealth Bank of Australia (CBA) and Westpac Banking Corp (WBC) gaining 0.07% and 0.05%, respectively.

Oil stocks stumbled. Woodside Energy Group (WDS) and Santos Ltd (STO) slid by 1.49% and 1.28%, respectively.

Hang Seng Index

The Hang Seng Index dropped 0.39% on Tuesday. Fears are growing regarding a more pronounced slowdown in economic activity.

Alibaba Group Holding Ltd (HK:9988) and Tencent Holdings Ltd (HK:0700) ended the day down 1.99% and 0.62%, respectively.

Alibaba shares continued to fall on the news that former CEO Daniel Zhang unexpectedly left his position in the cloud computing unit.

It was a mixed session for bank stocks. China Construction Bank (HK: 0939) fell by 0.23%. However, The Industrial and Commercial Bank of China (HK:1398) and HSBC Holdings PLC ended the day up 0.53% and 0.52%, respectively.

Sun Hung Kai (HK: 0016) steadied after the Monday sell-off, gaining 0.38%. Sun Hung Kai tumbled by 9.46% on Monday as the markets reacted to earnings and weak profits.

Nikkei 225

(For reference purposes only)

The Nikkei 225 gained 0.95% on Tuesday. Auto stocks were among the front runners on the weaker USD/JPY exchange rate. Toyota Motor Corp ended the day up 2.39%, with Nissan Motor Co. and Honda Motor Co. rising by 2.78% and 1.74%, respectively.

Bank stocks continued to climb. Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group ended the day up 1.01% and 1.03%, respectively.

The main components also enjoyed a positive session.

SoftBank Group Corp. (9984) and KDDI Corp. (9433) ended the day up 1.97% and 1.99%, respectively.

Tokyo Electron Limited (8035) and Sony Corp. (6758) saw gains of 1.20%, with Fast Retailing Co (9983) rising by 1.16%.

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