Asia Markets

Nikkei rebounds after recent uncertainty over Turkey crisis as China lags

Key Points
  • Asian markets closed mixed on Tuesday, with some major markets bouncing back after sliding in the last session.
  • The Nikkei 225 led the advance as markets appeared to shrug off uncertainty linked to Turkey.
  • Greater China markets lagged gains seen elsewhere in the region as investors digested data.
  • The Turkish lira firmed to trade below the 6.7 handle during Asia afternoon trade. 

Asian shares closed mixed on Tuesday, as some regional markets bounced back one day after declining over jitters related to economic uncertainty in Turkey.

The Nikkei 225 led gains, jumping 2.28 percent, or 498.65 points, to close at 22,356.08, as the yen gave up some of its recent strength — amid safe haven demand on uncertainty in Turkey. The yen traded at 111.01 to the dollar at 2:52 p.m. HK/SIN, compared to levels around the 110.3 handle seen during Asia Monday trade.

Exporters, including automakers and tech names, bounced back, with Honda Motor up 1.96 percent for the day. All of Tokyo's 33 sectors finished in positive territory, with the broader Topix ending higher by 1.63 percent.

Elsewhere, South Korea's Kospi edged higher by 0.47 percent to end at 2,258.91. Tech names were a mixed bag, with LG Electronics dropping 3.54 percent while index bellwether Samsung Electronics tacked on 0.22 percent.

Down Under, the added 0.76 percent to close at 6,299.60, with the financials, telecommunications and information technology subindexes recording gains of more than 1 percent.

Greater China markets, however, declined, lagging their regional peers. Hong Kong's Hang Seng Index erased 0.74 percent by 3:00 p.m. HK/SIN, but was off its intraday low, with the 4.29 percent drop in industrials leading losses before the market close. Tech sector names also recorded heavy declines an hour before the Hong Kong close, with heavyweight Tencent dropping 3.66 percent by 3:02 p.m. HK/SIN after the tech giant was stopped from selling a new game days after its launch.

The Shanghai Composite edged lower by 0.17 percent to close at 2,781.16 and the blue-chip CSI 300 declined 0.51 percent by the end of the session as markets digested a barrage of data released earlier. China fixed asset investment growth rose 5.5 percent compared to one year ago, missing the 6 percent estimate in a Reuters poll, Reuters said, citing official data. Retail sales for the month of July also came in below expectations, while industrial output was firm.

MSCI's index of shares in Asia Pacific traded marginally lower, last down 0.09 percent during Asia afternoon trade.

Turkey in the spotlight

The Turkish lira traded at 6.6150 at 2:54 p.m. HK/SIN, after trading at the 6.9 handle earlier in the session and touching a record low on Monday. The currency had pared some of its recent losses overnight after the Turkish central bank moved to calm market nerves.

"The efforts announced by the Turkish central bank to stabilize the TRY (Turkish lira) appear to have assisted. The TRY has not endured further depreciation in overnight trade, but it has not substantially declined either," Richard Grace, chief currency strategist at Commonwealth Bank of Australia, said in a morning note.

"Emerging market tensions will not evaporate, but they may subside for now," Grace said, adding that volatility in emerging market currencies could pick up down the road given expectations for the Federal Reserve to raise rates next month.

The lira dropped 20 percent on Friday when tensions between the U.S. and Turkey increased last week. That came after no progress was made on the detention of U.S. pastor Andrew Brunson, who is charged with supporting a group blamed for an attempted coup in 2016 against the government of President Recep Tayyip Erdogan.

There has largely been consensus that contagion risk from Turkey's economic woes was unlikely to be significant for markets elsewhere, including those in the emerging space.

"This risk to EM (emerging market) contagion is sentiment, not fundamental," said David Lafferty, chief market strategist at Natixis Investment Managers, in a note.

"Turkey has limited trade and economic ties to other EMs. However, market reaction can throw the baby out with the bathwater as we see with other fragile EMs like Argentina and Hungary, who both saw steep currency losses in sympathy with the lira," he added.

Wall Street slipped in the last session, with investor sentiment wobbly as a financial crisis in Turkey played out, although those losses had been relatively measured.

The Dow Jones Industrial Average slipped 0.5 percent, or 125.44 points, to close at 25,187.70, logging its fourth straight finish in negative territory. Other major U.S. indexes also finished the day with slight declines.

In Asian corporate news, Taiwanese contract manufacturer Foxconn (or Hon Hai Precision Industry) on Monday reported second-quarter net profit came in at 14.49 billion Taiwan dollars ($567.25 million), Reuters reported. That was below an average estimate of T$21.94 billion in a Reuters poll. Shares closed down 2.98 percent for the day.

Meanwhile, in Hong Kong, shares of Sunny Optical plunged 24.07 percent by 3:03 p.m. HK/SIN after the company announced first-half results on Monday. Revenue for the period rose 19.4 percent to 11.98 billion yuan ($1.74 billion) and net profit increased 2.5 percent, while net profit margin decreased.

In currencies, the dollar index, which tracks the U.S. currency against a basket of currencies, last traded at 96.226.

Also of note, the Indian rupee dropped to a record low on Tuesday, crossing the 70 level earlier in the day and hitting a new low. The currency traded at 69.88 to the dollar at 3:20 p.m. HK/SIN. Reuters quoted Subhash Chander Garg, the country's economic affairs secretary at the ministry of finance, saying that the currency's decline was due to external factors.

— CNBC's Fred Imbert contributed to this report.