Asia Market News: Hang Seng Index Slides on China PMIs and Policy Uncertainty

Bob Mason
Published: Mar 5, 2024, 02:50 UTC

Key Points:

  • In February, the China Caixin Services PMI slipped from 52.7 to 52.5.
  • The Hang Seng Index reacted to the weaker-than-expected PMI as investors awaited updates from the National People’s Congress.
  • Inflation numbers for Tokyo fueled bets on an April Bank of Japan pivot from negative rates.
Asia Market News

In this article:

China Sees Private Sector Activity Move Sideways in February

On Tuesday, service sector PMI numbers from China drew investor interest. In February, the Caixin Services PMI slipped from 52.7 to 52.5. Economists forecast the PMI to rise to 53.4.

According to the February Survey,

  • Business activity rose at the slowest pace in three months.
  • New orders from overseas rose at the most marked pace since June 2023,
  • However, lackluster domestic demand led to a modest increase in overall new orders. Overall, new orders rose at a slower pace than in 2023.
  • Despite the increase in new orders from overseas, business confidence weakened.
  • Firms reduced staff numbers for the first time since November 2023.
  • However, input prices increased, leading to an uptick in selling prices.

The figures were significant, with the National People’s Congress opening on Tuesday morning. Despite the better-than-expected Caixin Manufacturing PMI numbers, the service sector PMI raises questions about domestic demand. Importantly, weaker domestic demand warrants further measures to support the economy.

As a result of the softer-than-expected Caixin Services PMI, the Caixin Composite PMI remained unchanged at 52.5. Economists forecast the Caixin Composite PMI to increase from 52.5 to 53.1. In February, the Caixin Manufacturing PMI increased from 50.8 to 50.9.

AUD/USD Has a Mixed Reaction to the PMI Numbers from China

Before the PMI numbers from China, the AUD/USD rose to a high of $0.65113 before falling to a low of $0.65037.

However, in response to the PMI numbers, the Aussie dollar fell from $0.65096 to a low of $0.65037 before steadying.

On Tuesday morning, the AUD/USD was down 0.01% to $0.65072. The AUD/USD avoided a more marked decline as investors awaited updates from the National People’s Congress. In addition to growth forecasts, the markets expect policy measures to support the real estate sector and bolster the economy.

AUD/USD shows reaction to Caixin Services PMI
AUDUSD 3 Minute Chart 050324

Asian Equity Markets Had a Mixed Start to the Tuesday Session

The ASX 200 showed a relatively muted response to the PMI numbers from China. However, the Hang Seng Index tumbled as investors reacted to the weaker-than-expected data.

This morning, the ASX 200 was up 0.04%, while the Hang Seng Index was down 1.65% to 16,322. The Nikkei joined the broader Asian equity markets in negative territory, falling 0.53% to 39,897.

Uncertainty about stimulus measures impacted the appetite for riskier assets.

Tokyo Inflation and the Japanese Yen

Hotter-than-expected inflation numbers for Tokyo failed to sink the USD/JPY. The USD/JPY recovered from an early pullback despite rising bets on an April Bank of Japan pivot from negative rates.

The annual inflation rate for Tokyo accelerated from 1.8% to 2.6% in February. Core inflation picked up from 1.8% to 2.5%.

However, the USD/JPY was down by just 0.02% to 150.492.

USD/JPY held steady despite inflation numbers from Tokyo.
USDJPY Hourly Chart 050324

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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