Hang Seng Index, ASX200, Nikkei 225: Hang Seng Continues to Struggle

Key Insights:

• It was another mixed morning for the Asian equity markets, with the ASX200 and the Nikkei 225 finding support while the Hang Seng struggled.
• A bullish NASDAQ Index session from Tuesday and manufacturing PMI numbers provided morning support.
• Investor caution lingered ahead of the Fed delivering its first interest rate decision of the year today.

Market Overview

It has been a busy Wednesday session. Economic indicators from China failed to deliver the Hang Seng Index support. The all-important Caixin Manufacturing PMI rose from 49.0 to 49.2 in January. Economists forecast an increase to 49.5.

While the sector contracted at a softer pace, COVID-19 infections contributed to a rise in backlogs. Business confidence hit the highest level since April 2021 despite manufacturing companies reporting subdued demand conditions.

Weak overseas demand remains a headwind for the region, placing a greater onus on the Asian region to drive demand and economic growth.

While US economic indicators on Tuesday eased bets of a hawkish Fed Chair Powell press conference, investors remained cautious this morning. The US unemployment rate sits at 3.5%, well below the Fed’s 5% mandate, which would allow the Fed to continue pushing rates higher for longer.

ASX 200

The ASX 200 was up 0.42% this morning, supported by the NASDAQ Index gains on Tuesday and the economic calendar.

It was a busy morning on the economic calendar. From Australia, manufacturing PMI numbers for January delivered further support. The manufacturing sector avoided a contraction, falling from 50.2 to 50.0 versus a forecasted 49.8.

Mining and resource stocks continued to deliver support on Wednesday. BHP Group Ltd was up 0.85%, with Rio Tinto (RIO) and Fortescue Metals Group (FMG) seeing gains of 1.31% and 0.88%, respectively.

Bank stocks continued to send mixed signals, however. Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), and Westpac Banking Corp (WBC) saw red, while ANZ Group (ANZ) was up 1.16%.

Hang Seng Index

It was another mixed morning for the Hang Seng, which fell by 0.21%.

Tencent Holdings Ltd (HK:0700) continued to see red this morning, falling by 1.94%. Bank stocks also weighed, with Industrial and Commercial Bank of China (HK:9988) and China Construction Bank (HK: 0939) seeing losses of 0.48% and 0.39%, respectively.

Following a bearish Tuesday, Henderson Land (HK: 0012) was down 0.52%, while Hang Lung Properties (HK: 0101) was up 1.22%. Notably, Alibaba Group Holding Ltd (HK:9988) found much-needed support, rising by 0.46%.

While China’s manufacturing sector contracted at a softer pace, weak demand from overseas and Fed Fear likely contributed to the bearish morning.

Nikkei 225

The Nikkei 225 was up 0.18% this morning, supported by a steady USD/JPY at 130.05. Manufacturing PMI numbers from Japan failed to impress, with the PMI holding steady at 48.9. According to the January survey, output and new orders saw their slowest declines since October 2022, providing some good news.

Nissan Motor Co Ltd continued to find support on Tuesday’s news of an overhaul of the long-standing alliance with Renault SA that puts them on an equal footing. This morning, Nissan Motor Co Ltd was up 1.14%.

Tokyo Electron Ltd and Softbank Group Corp also delivered support, rising by 1.90% and 1.73%, respectively. However, Fast Retailing Co and KDDI Corp were a drag, falling by 0.68% and 0.47%, respectively.

Looking Beyond Today’s Session

It is a busy week on the global economic calendar. We expect continued market reaction to the Fed interest rate decision and the Fed Chair Powell press conference on Thursday. However, US corporate earnings, US economic indicators, and central bank chatter will also influence later in the week.

Meta Platforms (META), Apple (AAPL), Amazon.com (AMZN), and Alphabet Inc. (GOOGL) will release earnings over the remainder of the week.

From Asia, service sector PMIs will also draw interest on Friday ahead of the US Jobs Report.

Check out our economic calendar for today’s economic events.