Asia Markets

Markets in Asia close mostly higher after Caixin PMI beat forecasts

Key Points
  • The Bank of Japan's quarterly Tankan survey reflected that business sentiment had improved, with the big manufacturers' index coming in at +17, compared with +15 forecast.
  • China Caixin manufacturing PMI for June came in higher than expected after official manufacturing PMI also beat expectations.
  • A "bond connect" program allowing Hong Kong investors to trade in China's fixed income markets will be get a trial run on Monday.

Asia markets closed mostly higher on Monday, as markets digested the Caixin PMI data out of China and the Bank of Japan's quarterly Tankan survey.

Japan's rose 0.11 percent, or 22.37 points, to end at 20,055.8. South Korea's Kospi advanced 0.11 percent, or 2.69 points, to close at 2,394.48 — a tad below the 2,400 level. Australia's S&P/ASX 200 declined 0.65 percent, or 36.994 points, to finish the session at 5,684.5.

Markets in greater China traded slightly higher. Hong Kong's was up by 0.1 percent at 3:06 p.m. HK/SIN. The rose 0.07 percent, or 2.3616 points, to close at 3,194.7885, and the Shenzhen Composite gained 0.396 percent, or 7.5171 points, to end at 1,905.2037.

Caixin manufacturing PMI for the month of June came in at 50.4, above the 49.5 forecast from Reuters. Manufacturing activity was at a three-month high, Reuters said. Official manufacturing PMI released on Friday came in at 51.7, higher than the 51.0 forecast by Reuters, marking a faster-than-expected expansion.

The Australian dollar, which is sensitive to Chinese economic data, slipped after the data, trading at $0.7671 at 3:10 p.m. HK/SIN, compared with as high as $0.7695 before the release.

Market participants also eyed a "bond connect" program allowing Hong Kong investors to trade in China's fixed income market. A press release on the Hong Kong Monetary Authority (HKMA) website stated that trial operations of "northbound" trade began on Monday. HSBC said it had completed its first trade on the "bond connect" just after 9:00 a.m. HK/SIN, Reuters reported.

Why the China, Hong Kong bond trading link has huge potential
Why the China, Hong Kong bond trading link has huge potential

In a note on Hong Kong Exchanges and Clearing, the operator of Hong Kong's stock exchange, Nomura analysts Haifeng Cao and Shengbo Tang maintained their "Reduce" rating on the company. They said the new "bond connect" was unlikely to contribute much to revenue and that derivatives products will be "more meaningful for the HKEx."

Shares of HKEx were up 1.19 percent at 3:13 p.m. HK/SIN.

Meanwhile, the Bank of Japan's quarterly tankan survey reflected that business confidence had improved. The big manufacturers' index registered a score of +17, compared with the forecast of +15.

Japan's big manufacturers are feeling optimistic
Japan's big manufacturers are feeling optimistic

Central bank speakers could continue to impact on markets this week after comments from various officials at the European Central Bank, Bank of Canada and Bank of England resulted in currency moves last week, said National Australia Bank Head of FX Strategy Ray Attrill in a Monday morning note.

The Reserve Bank of Australia is expected to announce its decision on interest rates on Tuesday. Several ECB officials and the president of the Deutsche Bundesbank were due to speak over the course of this week.

"We very much doubt the euro will be ending this week where it started," Attrill said.

The euro, which hit a fourteen-week high against the dollar last week, fetched $1.1405 at 3:13 p.m. HK/SIN.

In corporate news, private equity firms TPG Capital and Hellman & Friedman have reportedly dropped their bids to take over Australia's Fairfax Media, Reuters said. Shares of Fairfax closed 10.91 percent down.

Gaming stocks traded in Hong Kong were in negative territory despite news that gaming revenues had risen for an eleventh consecutive month, but still disappointed expectations.

Gaming revenues rose 25.9 percent in June, compared with the 23 percent to 33 percent range forecast by analysts, Reuters said.

Wynn Macau was down 2.74 percent, Sands China fell 1.54 percent and Melco International Development sank 3.59 percent.

Even though June proved to be gross gaming revenues' (GGR) fastest growing month since the sector went through a recovery starting in the third quarter of last year, GGR missed bullish expectations from markets, Deutsche Bank research analyst Karen Tang said in a note, adding that June-July will likely be the peak in on-year growth.

Nomura research analysts Daniel Adam, Harry C. Curtis and Brian H. Dobson said they maintained their recommendation that investors should be "selectively bullish" on the sector as shares and sector valuations have risen.

'Somewhat unrealistic' to call dollar to fall below 100 yen: Japan's Mr Yen
'Somewhat unrealistic' to call dollar to fall below 100 yen: Japan's Mr Yen

In currency news, the dollar index, which measures the greenback against a basket of currencies, edged higher to trade above nine-month lows hit last week. The dollar traded at 95.761 at 3:15 p.m. HK/SIN.

Against the yen, the dollar continued to trade above the 112 handle, with the greenback fetching 112.58 yen.

In energy news, oil prices rose, with Brent crude futures up 0.45 percent at $48.99 a barrel and U.S. crude futures higher by 0.54 percent at $46.29.

Stocks closed mostly higher in the U.S. on Friday, with the Dow Jones industrial average adding 0.29 percent, or 62.6 points, to close at 21,349.63.

Markets in the U.S. will close early on Monday for the eve of Independence Day.