Hang Seng Index Falters, ASX 200 and Nikkei 225 Rally: A Tale of Diverging Fortunes

Key Insights:

• Hang Seng Index suffered, while ASX 200 and Nikkei found footing in Tuesday’s trading.
• China’s economic indicators dampened market sentiment, despite the PBoC rate cut.
• Chinese house price data eyed this morning amid the China crisis.

Overview

It was a mixed Tuesday session for the Hang Seng Index and the broader Asian markets. The Hang Seng Index saw red, while the ASX 200 and Nikkei were in recovery mode.

The RBA and wage growth figures from Australia delivered ASX 200 support, while hotter-than-expected GDP numbers from Japan delivered Nikkei support.

However, economic indicators from China weighed on market risk sentiment.

Industrial production in China increased 3.7% year-over-year in July versus 4.4% in June, with retail sales up 2.5% versus 3.1% in June. Economists forecast increases of 4.5% and 4.8%, respectively.

Other indicators were also bearish. The unemployment rate increased from 5.2% to 5.3%, with fixed asset investments rising by 3.4% versus 3.8% in June. Economists forecast fixed asset investments to be up 3.8%.

However, news of the PBoC cutting key policy rates offset the negative numbers.

There were no overnight US economic indicators from Monday to distract investors from the busy economic calendar and central bank activity.

The Wednesday Session

Today, house price figures from China will draw interest considering the real estate crisis. Economists forecast house prices to increase by 0.3% year-over-year in July after stalling in June.

However, investors will also to respond to overnight US retail sales figures that continued to signal a US soft landing. US retail sales increased by 0.7% in July versus +0.3% in June, with core retail sales up 1.0% in July versus +0.2% in June. Economists forecast retail sales to climb by 0.4% and core retail sales to fall by 0.3%.

The S&P 500 fell by 1.16% on Tuesday. It was also a bearish session for the Dow and the NASDAQ Composite, which saw losses of 1.02% and 1.14%, respectively.  The US retail sales figures refueled bets on a September Fed rate hike, leading the indexes into negative territory.

ASX 200

The ASX 200 gained 0.38% on Australian wage growth and PBoC support. Wages increased by 3.6% year-over-year in the second quarter versus 3.7% in the previous quarter. In the second quarter, wages rose by 0.8% versus 0.8% in the first quarter. Economists forecast wages to increase by 3.7% year-over-year and 0.9% quarter-on-quarter.

Significantly, the wage growth figures eased bets on further RBA rate hikes despite the RBA meeting minutes revealing board members being open to further hikes to bring inflation to target in a timely manner.

The Commonwealth Bank of Australia (CBA) and ANZ Group (ANZ) declined by 0.18% and 0.20%, respectively. However, The National Australia Bank (NAB) rose by 1.31% on cash earnings beating forecasts and share buyback announcement, with Westpac Banking Corp (WBC) gaining 0.27%.

Mining stocks also had a mixed session. Fortescue Metals Group (FMG) rose by 0.97%, while Rio Tinto (RIO) and BHP Group Ltd (BHP) fell by 0.44% and 0.29%, respectively. Demand jitters continued to weigh on RIO and BHP. Newcrest Mining (NCM) also saw red, sliding by 1.46%.

Oil stocks had a mixed session. Woodside Energy Group (WDS) gained 0.10%, while Santos Ltd (STO) fell by 0.38%.

Hang Seng Index

The Hang Seng Index ended the Tuesday session down 1.03%. Property company Country Garden Holdings Co Ltd. (HK2007) avoided another sell-off, rising by 1.25%. However, the PBoC move to boost growth failed to prevent a suite of losses.

Considering the main Index components, Tencent Holdings Ltd (HK:0700) and Alibaba Group Holding Ltd (HK:9988) ended the day with losses of 0.18% and 0.77%, respectively.

Bank stocks had a bearish session. The Industrial and Commercial Bank of China (HK:1398) and China Construction Bank (HK: 0939) declined by 0.57% and 0.24%, respectively. HSBC Holdings PLC slid by 1.84%. The deteriorating macroeconomic environment weighed on the banking sector.

CNOOC (HK: 0883) fell by 1.54% on falling oil prices.

Nikkei 225

(For reference purposes only)

The Nikkei 225 gained 0.56% on Tuesday, with GDP numbers from Japan supporting a bullish session. The economy expanded by 1.5% in the second quarter versus 0.9% in the first quarter. In the second quarter, the economy grew by 6.0% year-over-year versus 3.7% in the previous quarter. Economists forecast growth of 0.8% and 3.1%, respectively.

The banks had a bullish session. Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group saw gains of 0.42% and 1.04%, respectively on the GDP numbers.

Looking at the main components, Fast Retailing Co (9983) and Tokyo Electron Limited (8035) ended the day up 1.70% and 1.68%, respectively. SoftBank Group Corp. (9984) and KDDI Corp (9433) also found support, rising by 0.66% and 0.67%, respectively. Sony Corp (6758) trailed with a 0.37% gain.

Check out our economic calendar for economic events.