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Asia markets close mixed as traders digest earnings and look to BOJ decision

Asian markets open mixed

Asia markets closed mixed on Thursday as investors digested fresh earnings reports and awaited the outcome of the Bank of Japan's (BOJ) two-day policy meeting, due Friday.

Australia's ASX 200 closed up 16.90 points, or 0.31 percent, at 5,556.60, with the materials sub-index advancing 1.48 percent. Japanese shares declined, with the benchmark closing down 187.98 points, or 1.13 percent, at 16,476.84, while the Topix fell 14.67 points, or 1.11 percent, to 1,307.00.

Across the Korean Strait, the Kospi closed down 3.95 points, or 0.2 percent, at 2,021.10. In Hong Kong, the lost 0.33 percent in late afternoon trade.

Mainland Chinese markets finished mixed after selling off on Wednesday following reports that said Beijing was considering cracking down on risky wealth management products. The benchmark composite closed up 2.97 points, or 0.1 percent, at 2,994.97, while the Shenzhen composite fell 2.99 points, or 0.15 percent, to 1,950.99.

Reuters reported on Wednesday that draft rules from the China Banking Regulatory Commission targeted riskier assets, which were often packaged into high-yielding wealth management products (WMPs) by smaller banks and financial institutions.

David Qu, a markets economist with ANZ Research, said in a note to clients that the new regulations on WMPs may result in limits on their equity purchases. That was likely to benefit the bond market, he said.

Banks could also see lower funding costs as households view WMPs as substitutes for bank deposits and removing the perception that WMPs are risk-free could spur inflows into bank deposits, Qu said.

Asia-Pacific Market Indexes Chart

In Japan, the BOJ began its two-day meeting. Analysts broadly expect the BOJ will introduce fresh stimulus measures, which could include pushing interest rates deeper into negative territory or expanding its asset-purchase program, which buys securities including Japanese government bonds and exchange-traded funds.

"If the BOJ decides to act this week, they could expand the quantitative and qualitative easing (QQE) program or decide to reinvest maturities. If nothing happens this week, we expect the BOJ will act definitively in September," Jennifer Vail, head of fixed income research at U.S. Bank Wealth Management, said in a note.

But she added that the bank expected coordinated fiscal and monetary stimulus in Japan.

On the fiscal front, on Wednesday, Japanese media agency Jiji reported that Prime Minister Shinzo Abe was preparing a stimulus package worth 28 trillion yen ($265.30 billion), which exceeded initial estimates of around 20 trillion yen.

Peter Boockvar, chief market analyst at The Lindsey Group, said in a note it was still unclear how much of the 28 trillion yen stimulus plan would be new and how much of it would be "repackaged to make it seem huge."

"The timing of this chatter was likely done purposely ahead of the BOJ meeting where [BOJ Governor] Kuroda can have an idea of how much more paper he gets to now buy," said Boockvar.

The yen strengthened to the 104 handle against the greenback Thursday morning, trading as high as 104.50 before retreating to 104.66 as of 2:50 p.m. HK/SIN, compared with levels near 107 in the previous week, as traders await the BOJ's decision due Friday.

In company news, shares of Samsung Electronics closed down 1.31 percent after the smartphone maker announced its second-quarter earnings before market open.

Samsung reported revenue of 50.94 trillion won for the quarter ended June 30, a 2.4 trillion won increase on-year, while operating profit for the same period was at 8.14 trillion won, a 1.24 trillion won uptick on-year.

The company said both its handset and component businesses performed strongly to lead earnings growth, with its IT and mobile communications division seeing an improvement, led by higher sales of the flagship Galaxy S7 and S7 edge smartphones.

Nintendo shares, meanwhile, closed down 5.49 percent at 21,080 yen, as traders reacted to its first-quarter operating losses of $47.33 million, which the Japanese gaming company announced on Wednesday after market close.

Shares of major Australian miner, BHP Billiton, closed up 0.55 percent at 19.97 Australian dollars, despite a Reuters report that said the miner will book a charge of up to $1.3 billion to cover the costs of a dam disaster at the Samarco iron ore mine in Brazil last November.

BHP Billiton may have tracked other Australian iron-ore producers higher after the metal's price rose overnight, although its gain lagged peers Fortescue and Rio Tinto, which tacked on 4.76 percent and 2.10 percent respectively.

Micheal O Fiachra | EyeEm | Getty Images

South Korean consumer electronics manufacturer LG Electronics said its operating profit for the quarter ended June 30, was at 584.6 billion South Korean won ($519.41 million), more than doubling on-year.

The mobile communications division, however, slipped to an operating loss of 153.5 billion won on-year, as the company said it sold 13.9 million units of smartphones in the quarter, down 1 percent on-year.

LG said it expects a challenging third quarter for its mobile business, but added it plans to launch the next V-Series phones and expand the sales of mass tier models such as K/X series smartphones.

The results were released after the South Korean market closed for the day. LG Electronics shares finished down 2.14 percent at 55,000 won.

In the currency market, the dollar retreated against a basket of major currencies, with the dollar index trading at 96.522, compared with its last close at 97.053.

Stateside, the Federal Reserve opted to not raise interest rates at its meeting outcome on Wednesday, a decision that was widely expected by markets. The Federal Open Market Committee kept its overnight interest rate target in the 0.25 percent to 0.5 percent range.

However, it noted that the labor market has "strengthened" and said other indicators were pointing to growth.

"While a number of investment banks have increased their internal probability models for a September hike, the interest rate markets have gone the other way and priced out the prospect," said Chris Weston, chief market strategist at brokerage firm IG. Weston explained the "reverberations of this re-pricing" was seen in the weaker dollar.

Major U.S. indexes closed mixed on Wednesday, with the nearly flat at 18,472.17. The S&P 500 index closed down 2.6 points, or 0.12 percent, at 2,166.58, while the composite was up 29.76 points, or 0.58 percent, at 5,139.81.

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