Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Asian stocks fall as China rebound stalls, Japan losses deepen

Published 26/01/2024, 02:56
Updated 26/01/2024, 02:56
© Reuters.

Investing.com-- Most Asian stocks retreated on Friday as a stimulus-driven rebound in Chinese shares stalled, while Japan’s Nikkei 225 slid further away from 34-year highs as growing bets on a Bank of Japan pivot spurred more profit-taking.

Caution before key U.S. inflation data due later in the day, and an upcoming Federal Reserve meeting next week also kept investors on edge over risk-driven assets. This saw regional markets largely shrug off positive cues from a record-high overnight finish on Wall Street.

Chinese stock rebound cools, PMIs in sight

A rebound rally in Chinese markets appeared to have run out of steam, with the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes falling slightly on Friday. The two rebounded sharply from five and four-year lows this week after the People’s Bank of China unexpectedly cut its reserve requirement ratio for local banks, freeing up about 2 trillion yuan ($140 billion) in liquidity.

The two Chinese benchmarks were set to add more than 2% each this week- their best weekly performance since July 2023.

Hong Kong’s Hang Seng index fell 0.3%, with heavyweight Tencent Holdings Ltd (HK:0700) among the top weights on the index after Citibank cut the internet giant’s price target, warning that a slowdown in China’s video game industry was likely to weigh on revenue.

The Hang Seng was set to add over 5% this week, as it rebounded from a 15-month low.

But analysts questioned just how much economic support more monetary stimulus would provide to the Chinese economy, given that consumer and business spending in the country remained weak. Business activity also failed to pick up substantially over the past year.

Purchasing managers index data for January is now due next week, and is expected to provide more cues on business activity at the beginning of the new year.

Japanese stocks sink on profit-taking, inflation cools further

Japan’s Nikkei 225 index was the worst performer for the day, down 0.9%, while the broader TOPIX index shed 0.8%.

The two indexes were set to end the week marginally lower, seeing a heavy degree of profit-taking after surging to 34-year highs earlier in the week.

Weakness in Japanese shares came following somewhat hawkish signals from the BOJ, specifically Governor Kazuo Ueda. Ueda said that while the bank will maintain its ultra-dovish policy in the near-term, an end to the bank’s ultra-low interest rates was in sight, especially as inflation moved closer to the bank’s 2% annual target.

Softer-than-expected inflation data from Tokyo furthered this notion on Friday, with core inflation falling well below 2% for the first time in over 20 months.

While the timing of the BOJ’s potential pivot remained uncertain, any increases in Japanese interest rates portends an end to nearly a decade of ultra-loose monetary conditions enjoyed by local stocks. A dovish BOJ was a key driver of Japan’s stellar stock rally through 2023.

Broader Asian markets were mixed. Southeast Asian stocks marked steep losses, with Indonesian markets leading losses with a 1% decline.

South Korea’s KOSPI was an outlier for the day, surging more than 1% as it rebounded from a two-month low hit earlier in January.

Indian and Australian markets were closed.

Upgrade your investing with our groundbreaking, AI-powered InvestingPro+ stock picks. Use coupon INVPRO2024 to avail a limited time discount on our Pro and Pro+ subscription plans. Click here to know more, and don't forget to use the discount code when checking out!

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.