Asia close mixed; Nikkei leads advances, Shanghai falls

Most major Asian markets advanced on Thursday, taking cues from overnight gains in U.S. equities that followed a rise in oil prices, but Chinese stocks fell behind their regional peers and extended losses from the previous session.

Australia's ASX 200 closed up 56.74 points, or 1.09 percent, at 5,272.70, lead by a 5.74 percent increase in the energy subindex. Japan's Nikkei 225 added 457.08 points, or 2.7 percent, to 17,363.62, extending gains from the previous two sessions on the back of a relatively weaker yen. Across the Korean Strait, the Kospi climbed 16.27 points, or 0.81 percent, to 2,022.10. In Hong Kong, the Hang Seng index was up 1.44 percent as of 3:03 p.m. HK/SIN time.

Chinese markets extended Wednesday's losses. The Shanghai composite closed down 19.98 points, or 0.67 percent, at 2,952.60, after falling as much as 4 percent at one point in the Wednesday session. The Shenzhen composite fell 22.98 points, or 1.22 percent, to 1,848.52.

Hao Hong, chief strategist and head of research at BOCOM International, told CNBC Wednesday's market moves were explained by a "large shortage of liquidity this month, created by tax payment and medium-term lending facility (MLF) [contracts] due."

The People's Bank of China did a seven-day reverse repurchase agreement of 250 billion yuan on Wednesday, which Hong said was not enough to offset the shortage. Still, he said the prospects of imminent monetary stimulus were limited given the relative strength of the housing market.

On Monday, data showed China's home prices in 70 major cities increased 4.9 percent on-year in March.

Hong explained it is likely that the PBOC is "watching the property price surge very closely, and is giving property price much weight in making monetary policy," which further makes it unlikely that the the Chinese central bank will ease in the near term. "It has chosen to use shorter term liquidity tools instead."

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Oil prices advanced in Asian hours, with global benchmark Brent higher by 0.37 percent at $45.97, after settling up 4 percent overnight. The May front-month contract for U.S. futures finished up 3.8 percent at $42.63 during U.S. hours before expiring. On Wednesday, 2:36 p.m. HK/SIN time, the June front-month contract for U.S. futures was up 0.41 percent at $44.36 a barrel.

Analysts pointed to the overnight gains in oil as a factor for the higher finish in U.S. stocks on Wednesday.

On Wednesday, the Dow Jones industrial average added 0.24 percent, the S&P 500 was higher by 0.08 percent and Nasdaq composite closed up 0.16 percent.

"Oil prices remain the main driver for markets," said Rodrigo Catril, a currency strategist at the National Australia Bank, "It has been the case this week, [and] the assessment of good news continue to prevail over bad ones."

Reuters reported data from the U.S. Energy Information Administration showing a 2.1 million barrel rise in crude stocks last week, lower than a forecast for a 2.4 million-barrel rise. Oil prices previously retreated during Asian hours Wednesday after the reported end of a strike in Kuwait, which affected the OPEC producer's daily production numbers.

Energy plays in Asia closed higher, with shares of Santos jumping 9.98 percent, Woodside Petroleum up 5.87 percent, Inpex gaining 5.66 percent and South Korea's S-Oil up 1.46 percent. Mainland Chinese shares of Sinopec fell 0.15 percent.

In the currency market, the dollar strengthened against a basket of currencies overnight, with the dollar index finishing at 94.492, compared with the 93 handle it briefly touched in the previous session. As of 2:42 p.m. HK/SIN time on Thursday, the index was at 94.538.

"The strength in the dollar has not only been aided by the jump in U.S. yields, euro and yen weakness have also played a hand," said Catril.

The euro traded at $1.1295 overnight, while the yen was at 109.83 to the dollar after touching the 107 level earlier this week. Thursday afternoon local time, the dollar/yen pair was down 0.16 percent at 109.65.

Relative weakness in the yen sent export stocks in Japan higher, with shares of Toyota advancing 3.21 percent, Nissan up 3.15 percent and Honda higher by 2.13 percent.

Shares of Mitsubishi Motors were flooded with sell orders on Thursday, according to Reuters, and data showed it ended down 20.46 percent at market close. This follows news on Wednesday, where the Japanese automaker admitted it falsified fuel economy test data to make emissions levels look more favorable.

An investor sits in front of a screen showing stock market movements at a securities firm in Fuyang, in eastern China's Anhui province on April 20, 2016. The benchmark Shanghai composite index fell sharply in the session as investors remain cautious.
STR | AFP | Getty Images
An investor sits in front of a screen showing stock market movements at a securities firm in Fuyang, in eastern China's Anhui province on April 20, 2016. The benchmark Shanghai composite index fell sharply in the session as investors remain cautious.

Elsewhere, the Australian dollar traded at $0.7806 as of 2:46 p.m. HK/SIN time, after finishing at $0.7793 overnight.

Australian banking stocks advanced on Thursday, with the ASX 200's heavily weighted financials subindex adding 0.78 percent. The country's so-called Big Four banks - ANZ, Commonwealth Bank of Australia, Westpac and NAB - closed up between 1.25 and 1.67 percent.

The advance came after the Australian Bankers' Association (ABA) said the country's banks will begin to implement comprehensive new measures to protect consumer interests, increase transparency and accountability and build trust and confidence in banks. The measures include improved customer protection, banks being held accountable for poor conduct and better support for whistleblowers.

The Aussie benchmark index has gained 3.73 percent month-to-date in April and with Thursday's close moved closer to the psychologically key level of 5,300 not seen since last October.

"The big increase in stimulus spending and investment activity in China in first quarter has had a major impact on the ASX," according to Angus Nicholson, a market analyst at IG, who added the materials sector outperformed for year-to-date.

Nicholson said there is still momentum behind the index's current uptrend - the ASX closed above the 5,200 level for the first time on Wednesday since January this year.

"But the level everyone in the market is watching carefully is 5,352," said Nicholson. This was the level the index had closed on 23 October and its highest close since last August when equities sold-off globally, he added. "Should the ASX be rejected at any of these key levels that could signal we are in for a sharp decline and may be a good entry point for short positions."

Australian resource producers also advanced, with major miners Rio Tinto, Fortescue and BHP Billiton adding between 2.44 and 4.62 percent on the back of higher commodity prices.

Chinese metal plays were also up, with shares of Yunnan Copper advancing 2.38 percent, Baotou Steel up 3.48 percent and Aluminium Corp up 1.54 percent.

Base metal prices advanced on Thursday. Three month copper on the London Metal Exchange was up 0.63 percent, aluminum advanced 0.65 percent and nickel was higher 0.38 percent in the afternoon Asia time.

Steel futures in Shanghai were up some 7.49 percent in the afternoon, while overnight iron ore prices advanced 4.04 percent to $64.30 a tonne. Iron ore is a key steel-making component.

Analysts at ANZ said strong Chinese trade data in March improved sentiments towards commodities. China's Jan-March iron ore imports rose 6.5 percent on-year according to customs data, Reuters previously reported.

Though the momentum shows no signs of easing at the moment, analysts Daniel Hynes, Paul Deane and Anurag Soin, cautioned that "overall steel demand in China will remain weak this year, which should ultimately weigh on iron ore prices."

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