Asia Markets

Asia markets mostly higher despite Chinese data slightly missing forecasts

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Making sense of China's data deluge
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Making sense of China's data deluge

Asian markets mostly advanced on Friday, with traders shrugging off a slightly disappointing deluge of economic data from China, focusing instead on record finishes in the U.S. markets and a rebound in oil prices.

In Australia, the ASX 200 closed up 22.88 points, or 0.42 percent, at 5,530.90, posting a 0.6 percent gain for the week.

The Japanese market returned to trade after being shut Thursday for a public holiday, and the benchmark closed up 184.80 points, or 1.10 percent, at 16,919.92. For the week, the Nikkei posted a 4.09 percent gain.

Across the Korean Strait, the Kospi finished nearly flat at 2,050.47, giving up earlier gains of around 0.3 percent. In Hong Kong, the added 0.82 percent.

Chinese mainland markets traded higher, with the composite closing up 48.38 points, or 1.61 percent, at 3,051.02 and the Shenzhen composite rising by 22.74 points, or 1.16 percent, to 1,973.66.

The advanced followed an initially muted reaction to the release of Chinese industrial output, retail sales and fixed asset investment data.

China's industrial output for July grew 6 percent on-year, a touch lower than a Reuters poll forecast for a rise of 6.1 percent. Retail sales were up 10.2 percent in July, compared with a Reuters forecast of 10.5 percent, while fixed asset investment growth eased to 8.1 percent on-year in the January-July period, with the market expecting the number to come in at 8.8 percent, said Reuters.

Some analysts were sanguine on the readings.

"In once again printing not far from forecasts and still at levels many other economies can only hope for, disruption to markets was almost non-existent," Patrick Bennett, a strategist at CIBC, said in a note.

But ANZ economists Louis Lam and David Qu noted that industrial production was likely to continue to face downward pressure heading in the second half of this year as the mainland strives to meet overcapacity targets.

They added "growth will likely remain uneven in the second half of 2016 as traditional manufacturing sectors underperform."

Shane Oliver, head of investment strategy and chief economist at AMP Capital, agreed. In a note, he said the data suggests "that Chinese growth in the current quarter may be edging down to around 6.5 to 6.6 percent year-on-year."

In the currency market, the Australian dollar dropped from levels near $0.7685 before the release of the China data to as low as $0.7667. At 3:02 p.m. HK/SIN, the Aussie traded at $0.7682. China is one of Australia's key trading partners and Chinese data usually impacts the Aussie.


Markets also focused on oil price volatility amid speculation over the upcoming OPEC meeting.

In Asia trade, oil prices extended their overnight rebound, with U.S. crude futures up 0.6 percent at $43.76 a barrel after jumping 4.3 percent overnight. Global benchmark Brent added 0.35 percent to $46.20 after climbing 4.5 percent overnight.

Sentiment on oil received a leg up after comments from Saudi energy minister, Khalid al-Falih, appeared to lend more credibility to the idea that OPEC might consider taking action if oil prices remained low.

"His enchanting words sent equity markets into a froth," said Stephen Innes, a senior trader at OANDA Asia Pacific. "In another case of deja vu, and despite signals pointing to a potentially enormous bulge in crude stocks for 2017, there appears to be no taming of the oil market bull when OPEC speaks."

It's not the first time traders have speculated about potential OPEC action. Oil prices gyrated earlier this year amid speculation over steps OPEC could take to address the global supply glut. In June, OPEC members failed to reach an agreement on a new production ceiling.

Others also noted that oil prices were driving the gains in equity markets.

"Oil has been at the heart of the move, helping high yield credit spreads to narrow relative to U.S. treasuries and put real backbone behind the feel-good factor," said Chris Weston, chief market strategist at spreatbettor IG.

Energy plays in the region gained, with Santos shares up 3.96 percent, Fuji Oil Holding up 3.86 percent and Japan Petroleum up 1.87 percent. Hong Kong-listed shares of CNOOC advanced 3.65 percent in afternoon trade.

Expectations that supply might come more in line with demand could be dashed, however. The International Energy Agency (IEA) also said on Thursday that the world will consume less oil next year than previously thought, estimating global oil demand growth will slow from 1.4 millions of barrels a day in 2016 to 1.2 million barrels a day in 2017.

Andre Schoenherr | Getty Images

In company news, shares of Toshiba advanced 3.79 percent, after the Japanese company said its fiscal first-quarter results were close to what was reported by the Nikkei business daily, said Reuters. According to Reuters, that would have put Toshiba's operating profit at about $196 million.

Toshiba released the results after market close on Friday, with operating profit at 20.1 billion yen ($197 million) for the April-June quarter, swinging from a 6.5 billion yen loss in the year-earlier quarter as the company recovered from a massive accounting scandal.

Electronics maker Sharp saw its shares surge more than 19 percent after reports said China's anti-trust regulatory body had approved a multi-billion dollar takeover offer from Taiwanese manufacturer Hon Hai. However, Hon Hai shares dropped 3.69 percent, after the company posted second-quarter earnings.

Shares of South Korean company Naver, which owns messaging app Line, closed up 0.51 percent. In a research note, Nomura started coverage of the stock with a Buy rating, saying it expected Naver Pay to "re-accelerate its existing businesses, including e-commerce and online advertising," and "create new opportunities in online financial services and offline to online businesses."

Nomura analysts also said they expect Naver's photo app Snow, which is similar to Snapchat, to "become the leading social network for young internet users in Asia."

In other news, MSCI announced there will be several inclusions and deletions of Chinese companies from its MSCI China A Index, following its quarterly review. Additions included China Nuclear Energy, Shandong Linglong Tyre and Meinian Onehealth.

Major U.S. indexes closed at new record highs, with the up 117.86 points, or 0.64 percent, at 18,613.52.

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