Asian Markets Mixed; China PMI Beats Forecasts but Fails to Impress Investors

The major Asia-Pacific stock indexes closed mixed on Tuesday following a mostly lackluster session. Japan gave back some of last week’s solid gains for a second session, and there was no follow-through in the Australian market after yesterday’s record performance. China’s gains were also capped despite the release of better-than-expected manufacturing data.

On Tuesday, Japan’s Nikkei 225 Index settled at 18917.01, down 167.96 or -0.88%. Hong Kong’s Hang Seng Index finished at 23458.13, up 283.02 or +1.22% and South Korea’s KOSPI Index finished at 1754.64, up 34.52 or +2.19%.

China’s Shanghai Index settled at 2752.86, up 5.65 or +0.21% and Australia’s S&P/ASX 200 Index finished at 5076.80, down 104.60 or -2.02%.

China PMI for March Beat Expectations

China on Tuesday said the official Purchasing Manager’s Index for March was 52.0, beating expectations for an economy hit by the coronavirus outbreak. Analysts polled by Reuters had expected the official PMI to come in at 45 for the month of March. In February, the official PMI hit a record low of 35.7.

China’s National Bureau of Statistics said in its announcement of the PMI reading that there was continued improvement in the prevention and control of the outbreak in March, with a significant acceleration in the resumption of production.

The bureau attributed the expansionary PMI reading to the low base in February, but cautioned that it does not mean that the country’s economic activities have returned to normal levels.

You Have to Look at the Whole Picture Regarding China’s Economy

“Despite a rebound in China’s PMIs in March (manufacturing: 52.0; nonmanufacturing: 52.3), the monthly indicators, notably industrial production and retail sales, likely still fell 11.6% (year-on-year) and 6.0% (year-on-year) in March,” economists at ANZ said in a note following the data release.

“China’s March PMIs, which jumped back above the threshold 50-levels, are not surprising if one recalls that the contraction in February was dramatic, at a 15-year low,” the economists said. “The outlook for Q2 continues to be concerning due to an acute drop in external demand and lackluster domestic demand.”

Australian Shares Give Back Early Gains

Australian shares finished lower on Tuesday after giving back earlier gains. Early in the session, the Aussie market extended its gains from the previous session, helped by quarter-end balancing and on measures to slow the spread of the coronavirus outbreak and contain its economic impact. The lower close means the benchmark index remains poised for its biggest ever monthly drop. For the month, the S&P/ASX 200 Index is down about 17.5%.

Helping to fuel the buying early was rising investor sentiment, which was driven by an Australian government A$130 billion wage subsidy stimulus package.