Asia-Pacific Shares

Asia-Pacific Markets Post Solid Gains; Aussie Shares Higher after GDP Rose 3.1%

The major Asia-Pacific stock indexes were sharply higher on Wednesday as a private survey showed slowing services sector activity in China last month. Investors likely interpreted the news to mean the Chinese economy is not heating up as previously thought, thereby raising the possibility that current stimulus measures would be extended.

In the cash market on Wednesday, Japan’s Nikkei 225 Index settled at 29559.10, up 150.93 or +0.51%. Hong Kong’s Hang Seng Index is trading 29836.51, up 740.65 or +2.55% and South Korea’s KOSPI Index finished at 3082.99, up 39.12 or +1.29%.

China’s Shanghai Index settled at 3576.90, up 68.31 or +1.95% and Australia’s S&P/ASX 200 Index finished at 6818.00, up 55.70 or +0.82%.

China’s Services Sector Grows at Slowest Rate in 10 Months in February:  Caixin PMI

China’s services sector activity grew at its slowest pace in 10 months in February as firms struggled with sluggish demand and high costs, a private sector survey showed on Wednesday, prompting them to cut jobs.

The Caixin/Markit Services Purchasing Managers’ Index (PMI) fell to 51.5, the lowest since April, from 52.0 in January but remained above the 50-mark that separates growth from contraction on a monthly basis. Investors shrugged off the results from the report, expecting better numbers in the future.

“We expect manufacturing and services PMIs to recover in March, as the COVID-19 situation was quickly brought under control in recent weeks. Beijing may gradually relax some social distancing rules in coming months and some pent-up demand could be released,” Nomura wrote.

China Stocks Gain the Most in 3 Weeks on Growth Optimism

China stocks posted their biggest one-day gain in three weeks on Wednesday, led by banking and commodity shares, as hopes of domestic economic growth offset fears of tighter monetary policy. Some traders also attributed the market strength to bullishness ahead of the annual gathering of the National People’s Congress, which starts on Friday.

China’s top banking watchdog said on Tuesday regulators were studying effective measures to reduce the risk of foreign capital inflows. The remark is interpreted by some as pointing to Beijing’s little willingness to lift interest rates, a move that could invite more inflows.

Larry Hu, an economist at Macquarie Capital Ltd, said that there’s no need to worry about inflation in China. For 2021, we expect China to see reinflation, but not high inflation,” Hu wrote. “The reinflation trend is great news to COVID losers such as financials and industrial companies.”

Australia Shares Climb as Strong GDP Growth Cements Recovery Hopes

Australian shares climbed on Wednesday after a much faster-than-expected economic growth in the final quarter of 2020 cemented hopes of a stronger recovery this year. Data showed the economy accelerated 3.1% in the December quarter, higher than forecasts for a 2.5% rise.

A very low community transmission of COVID-19, coupled with massive and timely fiscal and monetary stimulus, has led to a strong rebound in the economy.

“The big picture is that while the initial recovery through the first half of 2021 may still be subject to air-pockets and jobs vulnerabilities linger…Australia is unambiguously on a surer path to sustained recovery,” Mizuho analysts said in a note.

For a look at all of today’s economic events, check out our economic calendar.

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James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.