Japan's Producer Price Inflation Rebounded, Chinese Companies Accelerate Stock Buyback Plans

Arjun Pandit
12 Mar, 2024
Mumbai

Benchmark indexes in Asia edged lower amid cautious trading, and investors reacted to local corporate and economic news. 

Chinese lawmakers ended their weeklong parliamentary session and did not provide any substantial measures to revive the property market and stabilize financial markets. 

Moreover, China's housing minister said troubled property developers should pursue bankruptcy and restructuring alternatives, sending strong signals that the government is not likely to provide any financial assistance to troubled developers. 

 

Tokyo indexes Drop to 3-week Lows, Producer Price Inflation Rebounded

Benchmark indexes in Japan traded down to three-week lows, and the yen and Japanese bond yields rallied on the hopes of the Bank of Japan ending its ultra-loose interest rate policy next week. 

Investors are closely watching the outcome of spring wage negotiations between large corporations and workers unions, and expectations are high that real wages, after adjusting for inflation, are likely to rise more than 4% for the first time in nearly two decades. 

Faster wage increases are likely to provide a strong signal to policymakers that inflation is likely to stay above 2%, supporting the move to end negative interest rates. 

Producer prices in Japan rose 0.6% from a year ago in February amid widespread price increases, the Bank of Japan reported Tuesday. 

The measure of wholesale prices rose at the fastest pace since last October, when prices advanced 1.1%. Prices rose at a slower pace of 0.2% in December and January. 

Prices of food products, beverages, metal products, machinery, fuel, and coal rose at an elevated pace. 

The Nikkei 225 Stock Average declined 0.4% to 38,659.89, and the Topix index dropped 0.8% to 2,646.82. 

The yen edged up 0.3% to 147.39, and the yield on the 10-year Japanese government bond inched higher to 0.77%. 

Tech stocks were among the leading decliners, and Tokyo Electron, Screen Holdings, SoftBank, and Advantest declined between 2% and 3%. 

Leading exporters also declined, and Panasonic, Canon, Sony, and Mitsubishi Electric fell between 0.5% and 1.5%. 

Marubeni, Mitsui & Company, Itochu, and Sumitomo declined between 2% and 4%. 

 

Stock Buybacks Lift Market Mood In Hong Kong and Shanghai

Stocks in Shanghai struggled but advanced in Hong Kong in the hopes that more companies may buy back their shares amid weak prices. 

Investors are hoping that the recent wave of stock buybacks from companies is indicative of the company's confidence in their businesses, and stock prices are trading at discounts to the company's business valuations. 

Moreover, these purchases contribute to stabilizing financial markets. 

WuXi Apptec jumped 5% to ¥57.54 after the biotech company said it bought back 50 million yuan of its own shares in Shanghai on Monday. 

AIA Group increased 1.5% to HK$63.15 after the company said it acquired its stock for HK$12.7 million. 

Xiaomi jumped 9.5% to $14.68 after the smartphone maker launched its electric vehicle, making an entry in a crowded market suffering from oversupply and intense price competition. 

China Vanke rose 3.5% to $5.91 on the hopes that the government will provide financial support to the state-controlled home developer. 

Separately, Moody's Investor Services downgraded the home developer's debt to junk level, citing a rising liquidity crunch amid a falling market and growing price pressures to sell newly developed projects. 

Belatedly, Moody's Ratings replaced the company's investment grade "Baa3" rating with "Ba1," which is considered speculative and "subject to substantial risk." 

The CSI 300 index edged down 0.03% to 3,588.30, and the Hang Seng index increased 1.7% to 16,870.31. 

 

India Stocks Traded Around Record High

Stocks in Mumbai edged higher in early trading, and investors reviewed mixed global markets. 

The Sensex and the Nifty indexes inched higher after struggling in the last two sessions, and the Indian government bond yields held steady as the rupee strengthened against the U.S. dollar. 

Domestic and international investors stepped up investing in Indian stocks after investors searched for bargains. 

Gold and silver prices continued to move higher, tracking gains in international markets, on the growing consensus that the U.S. Federal Reserve and the European Central Bank are laying the groundwork to cut interest rates starting as early as June. 

Lower interest rates weaken the U.S. dollar and support a higher price of precious metals. 

Market sentiment on Dalal Street has been positive after the Reserve Bank of India said last week that the March fourth quarter gross domestic product is likely to surpass the government's estimate.

The central bank's estimated fiscal year 2024 economic growth is likely to cross 8%, higher than the government's estimate of 7.6%. 

The Sensex index increased 0.01% to 73,516.42, and the Nifty index edged up 0.01% to 22,334.45. 

On the Mumbai stock exchange, 193 stocks traded at their 52-week highs and 105 stocks traded at their 52-week lows.

ITC declined 1% to ₹409.20, and the company's parent, British American Tobacco, is looking to divest between a $2 billion and a $3 billion stake in the company as early as this week. 

Mahindra & Mahindra decreased 0.5% to ₹1,888.60, and the company's February vehicle sales increased 26% to 71,384 units, and production expanded 26% to 73,380 units from 56,551 units.