China stocks ended lower on Tuesday amid concern about tighter Covid restrictions, but markets in Japan, Australia and India all enjoyed a rise.
Investors in China were also concerned about tightening global monetary policies, which could drain liquidity and limit room for China continue easing its policy.
The CSI 300 Index fell 0.3% at close, while the Shanghai Composite Index was down 0.4%.
The Hang Seng Index dropped 0.4%, while the Hang Seng China Enterprises Index lost 0.5%.
Other Asian stock markets attempted to steady as investors turned their focus to this week’s US labour market report to gauge if interest rate hikes that have been priced in around the world are justified.
Several big Chinese cities escalated Covid restrictions on Tuesday, with Shenzhen closing more businesses and Dalian locking down millions.
“Despite a decline in headline Covid cases, the actual Covid situation in China might be worsening,” Nomura analysts said in a note. “Markets could once again be hit in the next couple of weeks, likely triggering another round of cuts (in GDP forecasts) by economists on the street.”
Energy companies slumped more than 4%, with coal miners shedding 5.4% to lead the decline. Energy stocks have gained more than 12% so far in the month, amid a supply shortage due to China’s most severe heatwave in decades.
State media reported over the weekend that the power crunch driven by drought in the southwestern province of Sichuan had started to ease as temperatures fell.
Real estate stocks rose 1.9% after Caixin reported China would issue 200 billion yuan ($29 billion) in special loans to help developers finish stalled housing projects.
China will step up measures to boost demand and stabilise employment and prices in the second half to optimise economic outcomes, the country’s finance ministry said on Tuesday.
China and the United States made a breakthrough with an audit deal late last week, but legal experts and China watchers warn the two sides could still clash over how the accord is interpreted and implemented.
Tech Heavyweights Lead Nikkei Higher
Japan’s Nikkei ended more than 1% higher led by technology heavyweights, as the benchmark rebounded from a two-week low hit in the previous session.
The Nikkei share average rose 1.14% to close at 28,195.58, while the broader Topix climbed 1.25% to 1,968.38.
“Wall Street declined overnight but their losses were limited, which underpinned sentiment for the Japanese market,” said Seiichi Suzuki, chief equity market analyst at Tokai Tokyo Research Institute, adding that the US futures gain was another positive factor.
US stocks closed lower on Monday, adding to last week’s sharp losses on nagging concerns about the Federal Reserve’s determination to aggressively hike interest rates to fight inflation even as the economy slows.
In Japan, chipmaking equipment maker Tokyo Electron rose 1.65% and was the biggest boost for the Nikkei, followed by tech investor SoftBank Group, which rose 1.7%. Phone company KDDI rose 2.1%.
NEC surged 6% to become the top gainer, after the computer maker announced buying back up to 2.5% of its own shares.
Woodside Bolsters Aussie Shares
Australian shares settled higher as well, as Woodside Energy boosted energy stocks after declaring a record interim dividend, and tech heavyweights gained following a sharp sell-off in the previous session.
The S&P/ASX 200 index closed 0.5% higher at 6,998.3, recouping some of the losses suffered on Monday in its worst session since June 30.
“Energy producers and earnings-related announcements led today’s rebound in the market,” said Kunal Sawhney, chief executive officer of Kalkine Group.
“But for the rest of the week, the broader theme that is likely to shape market direction is Powell’s comments, which were heavily and unequivocally tilted towards continued tighter monetary policy.”
Shares of Woodside Energy rose 3.8% to their highest since July 2019, before paring some gains to close up 1.5%. The gas producer more than tripled its interim dividend payout and posted a five-fold increase in first-half profit on booming oil and gas prices and its takeover of BHP Group’s petroleum arm.
Meanwhile, BHP said its shareholders had sought inclusion of climate sensitivity analysis in financial statements from 2023, and consistency on climate policy. Shares of the company closed down 0.6%.
Another Monthly Gain for Indian Shares
Indian shares rose over 2%, driven by a surge in banking and financial stocks on the back of a rally in Bajaj Finance and Bajaj Finserv.
The NSE Nifty 50 index ended up 2.6% at 17,759.30, while the S&P BSE Sensex gained 2.7% at 59,537.07.
The indexes ended higher for a second straight month, gaining over 3%. The Nifty 50 index also ended at its highest ever monthly close on charts.
“Indian macros are improving a lot. Despite the heavy selling witnessed on Monday, foreign investor selling was negligible, which was one important trigger,” Vikram Kasat, head advisor at Prabhudas Lilladher, said.
Sentiment got a further boost after the rupee notched its biggest one-day gain in a year against a wobbly dollar, while equities saw a rush of foreign investor inflows.
The partially convertible rupee surged 0.6% to 79.45 in its best session since August 27, 2021. The currency had hit a record low of 80.12 on Monday, but closed at 79.9625.
The Nifty bank index rose 3.3%, while the finance index gained 3.4%. Shares of Bajaj Finance and Bajaj Finserv surged over 5% each, after Bajaj Finserv set Sept 14 as the record date for sub-division and issue of bonus shares.
“Globally, all countries are facing the churn and India seems to be the best placed jurisdiction in terms of growth and inflation outlook in FY23,” Soumya Kanti Ghosh, group chief economic adviser, State Bank of India said in a report.
“We believe the China story may now be facing clear headwinds and India is likely to benefit from such stark realities over the longer term.”
In the benchmark Nifty 50 index, all 50 stocks traded in positive territory.
India’s equity and money markets will be closed for a holiday on Wednesday.
- Reuters with additional editing by Jim Pollard