Asia markets slide: Shanghai shares hit 4-month low; Japan, HK post second-straight daily loss

BNY Mellon is "pulling back" on China, in light of weak economic data, a weak inflation outlook and tech tensions for the country. Instead, it is looking at Korea, Singapore and Thailand for investment opportunities.

"We are pulling back a little bit on the overweight call on China," Aninda Mitra, BNY Mellon's head of Asia macro and investment strategy, told CNBC in an interview Wednesday. China's April activity data "showed a significant loss of momentum," as manufacturing activity in the world's second-largest economy unexpectedly sank into contraction territory in April.

"Even more troubling than that, I think, has been the deep slippage in the economy when inflation is flat on the year [and] producer prices are in deeply in deflation," he added.

Mitra said that when an economy reopens, prices "hold up a little bit better" in Japan, for example, but this was not the case in China. He said he still believes consumption is rebounding in China, but the "non-consumption" part of China's economy is experiencing excess capacity.

This is is a drag on prices, and in turn, leading to a "big question mark" about the earnings outlook for for China.

As such, Mitra said that investors can prioritize other markets where tourism and financial flows will come through. "And so we would be looking at Korea, Singapore, Thailand more closely for opportunities there."

— Lim Hui Jie

Some of the larger U.S. tech companies are the predominant winners of artificial intelligence, said Eric Sheridan, managing director and U.S. internet analyst at Goldman Sachs.

"We see four major companies like Amazon, Meta, Alphabet, and Microsoft building what's been termed as large language models," said Sheridan on CNBC's "Squawk Box Asia" Wednesday.

These tech giants have raced to introduce their own versions or AI tools to rival OpenAI's chatbot ChatGPT. Alphabet, Google's parent company, has been rolling out Bard.

"You need a scale of capital and engineering talent to build these large language models," said Sheridan, as Goldman Sachs Asia TechNet Conference 2023 takes place in Hong Kong on Wednesday.

"We believe Alphabet will be the winner on the computing side and Nvidia on the semiconductor side of providing [a lot of the computational chips that are necessary,]" he added.

— Sheila Chiang

Shares of Chinese tech giant Tencent and K-Pop company Hybe slid a day after a Tencent subsidiary and the South Korean agency were reported to have signed a music distribution deal.

Tencent shares in Hong Kong lost as much as 1.36%, while Hybe -- whose artists include K-Pop sensation BTS -- sank by as much as 1.65%.

Reuters, citing the Seoul Economic Daily, said the deal would allow music from Hybe artists to be on streaming platforms owned by subsidiary Tencent Music, such as QQ Music and Wesing.

— Lim Hui Jie

The Reserve Bank of New Zealand increased its benchmark policy rate by 25 basis points to 5.5% on Wednesday. This is its 12th straight rate hike since October 2021, and in line with expectations from economists polled by Reuters.

The New Zealand dollar strengthened 0.96% against the greenback to trade at 0.6185.

"With the Bank having revised down its near-term forecasts for both headline inflation and the output gap, we do think there's a good chance its hiking cycle is now over," Abhijit Surya of Capital Economics said in a note after RBNZ released its rate decision.

— Lim Hui Jie and Clement Tan

Shares of Alibaba in Hong Kong tumbled as much as 2.7% at the open. The Chinese e-commerce giant is one of the top losers on the Hang Seng Index today.

CNBC reported Tuesday the company is cutting 7% of the workforce in its cloud computing division as the unit gears up for an initial public offering.

The move will see the Chinese tech giant offer severance packages to those affected, the source told CNBC, adding that Alibaba has started informing staff of the layoffs and will be helping those affected move to different positions internally if they desire.

— Lim Hui Jie, Arjun Kharpal

New Zealand's retail sales volume fell 4.1% year-on-year in the first quarter of 2023, its second straight quarterly contraction following a 4% fall in the quarter ended December 2022.

Lower sales in hardware and vehicles were the main causes, Melissa McKenzie, Stats NZ business financial statistics manager, said in a statement. Stats NZ is the country's official data agency.

Sales of hardware, building and garden supplies slid 13% year-on-year, while sales of motor vehicles and parts fell 7.5% compared to the first quarter last year.

On a seasonally adjusted quarter-on-quarter basis, retail sales fell 1.4% in the first quarter of 2023, following a 1% decrease in the previous quarter.

— Lim Hui Jie

Business sentiment at Japanese manufacturers turned positive for the first time this year, the Reuters Tankan survey for May showed.

The Reuters Tankan survey is similar to the quarterly Tankan survey conducted by the Bank of Japan, with the BOJ's Tankan survey used to formulate Japan's monetary policy.

The sentiment index for big manufacturers stood at +6, up from April's figure of -3. A reading above 0 represents a favorable sentiment, while a number below 0 represents unfavorable sentiment.

Separately, sentiment in Japan's services sector hit a five-month high, with the the Reuters Tankan poll showing a reading of +25, its joint highest level since February 2020.

— Lim Hui Jie

Goldman Sachs has named Amazon, Uber, and Meta as three tech stocks that offer the "most compelling risk/reward" looking ahead to the rest of the year.

In a note to clients on May 19, Goldman also ranked the three companies in order of preference.

CNBC Pro subscribers can read more here.

— Ganesh Rao

There's an opportunity for investors in pharmaceuticals that's been "underrepresented for a very long time," according to fund manager Philip Ripman of Storebrand Asset Management.

He names three stocks to play the theme.

CNBC Pro subscribers can read more here.

— Weizhen Tan

New Zealand's central bank is expected to raise its benchmark policy rates to 5.5% when it meets Wednesday, according to a Reuters poll of 25 economists.

21 of the economists surveyed expected a hike, while the remainder expected a pause. In the same Reuters poll, the median expected rate hike is 25 basis points.

A rate hike would be the Reserve Bank of New Zealand's 12th since October 2021.

The RBNZ previously surprised investors with a 50 basis points hike to 5.25% in March, when most economists had expected a raise of 25 basis points.

— Lim Hui Jie

Some House Republicans on Tuesday raised skepticism over Treasury Department Secretary Janet Yellen's deadline to raise the debt ceiling and avert a default.

"We'd like to see more transparency on how they come to that date," House Majority Leader Rep. Steve Scalise said Tuesday at a news conference.

He added that Yellen's Monday comments signal some "openness to the idea that June 1 may not be the so called X-date."

— Christina Wilkie, Samantha Subin

Oil prices rose after Saudi oil minister Prince Abdulaziz bin Salman told market speculators on Tuesday they should "watch out," bolstering fears that there could be future challenges in the market.

"Speculators, like in any market, they are there to stay. I keep advising that they will be ouching. They did ouch in April. I don't have to show my cards, I'm not [a] poker player … but I would just tell them, watch out," he said during an energy-focused panel of the Qatar Economic Forum in Doha.

Both Brent and WTI crudes gained more than 1%, or about $1, on Tuesday.

— Alex Harring, Ruxandra Iordache

Markets are reacting to recent hawkish talk from Federal Reserve officials, now pricing in only one rate cut this year.

Traders in the fed funds futures market were pricing in just a 23.4% chance of an interest rate increase at the June 13-14 Fed meeting, according to the CME Group.

However, they also now see at most one decrease by the end of the year, assigning a 58.3% probability that the central bank will drop the funds rate to a 4.75%-5% target.

In recent weeks, markets had been pricing in up to three cuts. However, policymakers in recent days have spoken against the likelihood of a loosening of policy, with Minneapolis Fed President Neel Kashkari telling CNBC on Monday that it's possible rates will rise if inflation doesn't slow.

— Jeff Cox

Energy stocks gained on Tuesday as oil price rose, lifting the S&P 500 sector about 1.5% during morning trading.

Some of the outperformers included Chevron, rising nearly 3% on an upgrade from HSBC. APA Corp, Exxon Mobil, Marathon Oil and Occidental Petroleum rose more than 1% each,

— Samantha Subin