Asia Markets

Asian markets close mostly higher, shrugging off North Korea missile launch

Key Points
  • Markets shrugged off geopolitical tensions in the region after North Korea launched a ballistic missile on Tuesday.
  • China Caixin services PMI released on Wednesday showed slowing growth in June, compared with May.

Most Asian bourses shrugged off geopolitical concerns on the Korean peninsula on Wednesday, turning positive after early cautious trade.

North Korea claimed the missile it launched on Tuesday was an intercontinental ballistic missile capable of carrying a heavy nuclear warhead, with U.S. military officials confirming that it was an ICBM. The missile landed in Japan's exclusive economic zone (EEZ).

South Korea and the U.S. have responded to the North's missile launch by conducting an offensive ballistic missile drill, Reuters reported.

North Korea wants to decouple US from peninsula: Former ambassador

The Nikkei 225 erased earlier losses to close higher by 0.25 percent, or 49.28 points, at 20,081.63. Down Under, the S&P/ASX 200 finished the session down 0.35 percent, or 20.518 points, at 5,763.3.

South Korea's benchmark Kospi index reversed losses, rising 0.33 percent, or 7.83 points, to end at 2,388.35.

The won was softer against the greenback, trading at 1,149.53 to the dollar at 3:30 p.m. HK/SIN, compared with the dollar fetching as little as 1146.58 earlier in the session and with levels around 1,141 earlier in the week.

Greater China markets rose modestly as markets digested the release of Caixin services PMI data for the month of June.

The gained 0.34 percent by 3:23 p.m. HK/SIN. On the mainland, the advanced 0.76 percent, or 24.2790 points, to close at 3,207.0829 and the Shenzhen Composite rose 0.876 percent, or 16.6112 points, to end at 1,913.1379.

The Caixin services PMI showed on Wednesday that growth in China's services sector slowed in June. The Caixin services PMI fell to 51.6 from 52.8 in May. The June composite PMI, which takes into account both the services and manufacturing sectors, fell to 51.1, compared with 51.5 last month.

Defense stocks in South Korea were mixed as markets kept an eye on geopolitical developments in the Korean peninsula. Korea Aerospace closed lower by 0.85 percent, but defense contractor Hanwha Techwin saw its shares gain 1.72 percent.

Retail stocks in South Korea were mostly higher, with Lotte Shopping shrugging off geopolitical concerns to close higher by 1.34 percent. Nomura research analysts Cara Song and Jiun Im had upgraded the stock from "Neutral" to "Buy" in a Tuesday note, citing the larger-than-expected unlocking of asset value as the company goes through restructuring.

A closer look at South Korean markets

In Australia, shares of travel retail company Flight Centre closed up 10.36 percent after the company reported guidance for the next year. The company said underlying profit before tax was expected to range between $325 million and $330 million, Reuters said.

Shares of Tencent in Hong Kong were higher by 0.52 percent in late trade a day after a popular mobile game made by the company was criticized online by a state-run newspaper. Tencent shares had ended the previous session down 4.1 percent.

Citi analyst Alicia Yap maintained her "Buy" call on the company's stock in a Tuesday note. The new playing-time limits implemented by Tencent will not have a material impact on revenue from the company's "Honour of Kings" game, Yap said. Weakness in Tencent shares should be viewed as a buying opportunity, Yap added.

In currencies, the safe-haven yen traded at 113.29 to the dollar at 3:28 p.m. HK/SIN. The yen had strengthened to trade around 112.8 following Tuesday's missile launch in the previous session.

"Further downside (in dollar/yen) could be expected if uncertainty and geopolitical risk accelerate the flight to safety. From a technical standpoint, the dollar/yen has found some resistance at 113.50. A failure of bulls to secure control above this level could open a path lower back towards 111.60," FXTM research analyst Lukman Otunuga said in a Tuesday evening note.

Turning point for central banks

The Australian dollar firmed to trade at $0.7619 at 3:30 p.m. HK/SIN. The Aussie dollar had traded as low as $0.7595 overnight following the Reserve Bank of Australia's decision to hold interest rates steady on Tuesday.

While the central bank was widely expected to stand pat, some traders had been speculating the RBA might deliver hawkish signals after the European Central Bank and the Bank of England took a more hawkish bent last week.

The dollar index, which measures the dollar against a basket of currencies, was nearly flat at 96.146.

In energy news, Brent crude futures rose 0.16 percent to trade at $49.69 a barrel and U.S. crude futures gained 0.04 percent to trade at $47.09.

U.S. President Donald Trump said on Twitter that he would like prices of gasoline to "go even lower" after they fell to their lowest level in more than a decade in the U.S. on July 4. The Nymex RBOB gasoline contract for August 2017 was off by 0.34 percent at 3:00 p.m. HK/SIN.

U.S. markets were closed on Tuesday for Independence Day. In Europe, stocks closed lower. The Stoxx 600 closed down 0.29 percent, with most major indexes in the region closing lower.