Asian Stocks Gain Amid Wild Swings as China, Hong Kong Advance

  • Japanese equities erase rally as investors weigh earnings
  • China shares in Hong Kong jolted by two-minute plunge

Asian stocks advanced on a day punctuated by broad swings, with Shanghai equities climbing back from an early loss amid disappointing economic data while Tokyo shares briefly erased a rally. China stocks trading in Hong Kong finished higher after being jolted by a sudden plunge.

The MSCI Asia Pacific Index rose 0.5 percent to 126.38 as of 4:28 p.m. in Hong Kong, climbing from a one-month low. Investors weighed corporate earnings and a report that Japanese Prime Minister Shinzo Abe will postpone a two-percentage point boost to the sales tax, as well as the data from China that missed economists’ estimates.

“There’s a possibility of more stimulus following the string of disappointing economic data over the weekend,” Bernard Aw, a strategist at IG Asia Pte, said by phone. “There aren’t many drivers for equities going forward. Fundamentally, economic growth and earnings aren’t that strong.”

The Shanghai Composite Index rose 0.8 percent, after earlier fluctuating near a two-month low as data signaled a deepening slowdown for the world’s second-largest economy.

Economic Data

Poor steel and coal output dragged on industrial production in China, which increased 6 percent from a year earlier versus economists’ forecasts of 6.5 percent. Retail and investment readings also disappointed, according to the reports on Saturday. A day earlier, data showed a slump in new credit last month. China’s central bank moved to reassure investors that monetary policy would continue to support the economy, with a statement Saturday that sought to explain the weakness in new loans.

Hong Kong stocks increased 0.8 percent, rebounding from their lowest levels in two months on speculation China’s state leader Zhang Dejiang will give clarity on the start date for an exchange trading link with Shenzhen when he visits the city this week. Hong Kong’s Chief Executive Leung Chun-Ying said last week he hoped China’s government would announce the start of the delayed link as soon as possible.

A sudden plunge by Chinese stocks in Hong Kong had traders scrambling to find a trigger for the slump that coincided with a surge in futures volumes. The Hang Seng China Enterprises Index tracking some of the nation’s biggest companies tumbled from an advance of 1 percent to a loss of 1.5 percent in about two minutes, before rebounding back to a gain. The gauge ended 0.1 percent higher. The same shares in Shanghai didn’t replicate the move.

“We have been trading on low volume without any major news, so there may have been something that triggered some bigger funds to sell a certain position or using futures to hedge and that triggered the domino effect for that moment,” said Jackson Wong, associate director at Huarong International Securities Ltd. in Hong Kong. “But that’s only my speculation."

Sales Tax

Japan’s Topix index rose 0.1 percent, after a morning rally of 1 percent melted away.

Abe will postpone raising the sales tax to 10 percent after judging it will threaten efforts to pull Japan out of deflation, the Nikkei reported. It was scheduled to take place in April, the newspaper said. That would be the second time Abe has delayed the increase. Tomomi Inada, Japan’s policy chief, denied the report on public broadcaster NHK.

“Any delay on the sales tax hike in Japan would be bullish for equities,” James Woods, a strategist at Rivkin Securities in Sydney, said by phone.

Japan will report gross domestic product on Wednesday, and economists are predicting the figures will show the country narrowly avoided falling into a recession in the first quarter. Friday marked the peak of Japan’s earnings season, with more than a fifth of the Topix’s companies reporting results, many of them after the market closed.

Australia’s S&P/ASX 200 Index climbed 0.6 percent. New Zealand’s S&P/NZX 50 Index closed little changed. Taiwan’s Taiex index added 0.2 percent, while South Korea’s Kospi index gained 0.1 percent. Singapore’s Straits Times Index was 0.1 percent higher.

Philippine Rally

Thailand’s SET Index added 0.1 percent, paring a gain of 0.8 percent, as Southeast Asia’s second-biggest economy expanded more than analysts estimated, spurred by the military government’s increased spending. The Philippine Stock Exchange Index climbed 1 percent, extending gains following last week’s peaceful presidential elections that gave Rodrigo Duterte a landslide victory. The gauge has climbed 7.4 percent since the vote last Monday.

Cosmetics firm Shiseido Co. surged 9.9 percent in Tokyo after raising its net income forecast on better sales to tourists visiting Japan. Sumitomo Electric Industries Ltd. jumped 14 percent after saying operating profit will climb 12 percent this fiscal year. Mirae Asset Securities Co. and Daewoo Securities Co. rose at least 6.8 percent after the South Korean brokerages announced plans to merge in November.

Futures on the S&P 500 Index were little changed. The U.S. equity benchmark index dropped 0.9 percent on Friday, posting the longest streak of weekly losses since January, after disappointing reports from Macy’s Inc. to Nordstrom Inc. sent retail shares tumbling.

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