Japan Wage Negotiations Dominate Market Sentiment, China Stocks Under Pressure Ahead of Earnings

Arjun Pandit
14 Mar, 2024
Mumbai

Asian stock markets lacked momentum, and investors stayed cautious in China ahead of the release of earnings announcements from major companies next week. 

Moreover, annual wage negotiations in Japan, known as Shunto, dominated market sentiment after several large corporations agreed to significant wage increases for the second year in a row, raising hopes of rate action by the Bank of Japan. 

 

Spring Wage Negotiations Dominate Market Sentiment in Tokyo 

Market indexes in Tokyo rebounded from morning losses driven by weakness in tech stocks following the decline in New York in overnight trading. 

Stocks struggled to gain traction, and the yen traded around 147 against the U.S. dollar amid widespread speculation that the Bank of Japan is likely to end its negative interest rate policy next week. 

Japan is the only developed country with negative interest rates after keeping rates near zero for more than two decades. 

Investors also keenly awaited the details of annual wage negotiations between the large Japanese companies and unions after Toyota Motor agreed to increase wage demand by more than 5% for the second year in a row. 

The Toyota agreement generally sets the tone for other automakers and leads Japanese companies to finalize their wage agreements. 

Toyota agreed to the largest wage increase since 1999 and accepted the union's demand for a monthly increase between ¥7,940 ($54) and ¥28,440 ($194). 

Nissan Motor also agreed to the monthly wage hike demand of ¥18,000, or $123. 

Nippon Steel, JFE Steel, Kobe Steel, Honda Motor, Mazda, and Japan Airlines are some of the other leading companies meeting or exceeding workers' unions higher wage demands for the second year in a row. 

Real wages in Japan have been stagnant for more than two decades, and companies are willing to provide nominal wage increases of as much as 12% amid labor shortages and rising inflation. 

Toyota Motor closed nearly unchanged at ¥3,444.0, Honda Motor advanced 1.1% to ¥1,751.50, and Nissan Motor advanced 2.2% to ¥563.10. 

The Nikkei 225 Stock Average gained 0.2% to 38,782.48, and the Topix index jumped 0.4% to 2,658.07. 

Diversified conglomerates Marubeni, Itochu, Mitsubishi, and Mitsui & Company gained between 0.7% and 2.2%. 

Semiconductor stocks led decliners, and Tokyo Electron, Advantest, Screen Holdings, and Disco Corp. fell between 1% and 3.5%. 

 

Caution Prevailed In China Trading Ahead of Earnings Releases 

Stocks in Shanghai and Hong Kong were under pressure for the second day in a row ahead of a string of earnings announcements next week and rising tensions between China and the U.S. 

The CSI 300 index decreased 0.06%, and the Hang Seng index declined 0.5% to 16,984.44. 

About 30 companies included in the widely followed Hang Seng index are scheduled to release earnings next week, and investors turned cautious amid economic uncertainties. 

AIA Group decreased 4.4% to HK$62.0 after the insurance company's 2023 earnings met market expectations. 

AIA said 2023 earnings increased 15% to $5.76 billion, or 32.68 cents, in a filing with the Hong Kong Stock Exchange.

AIA, one of the largest travel insurance providers, benefited last year after the Hong Kong government relaxed inbound travel restrictions following three years of border closures during the coronavirus pandemic. 

Tech stocks were among the leading decliners after the U.S. House of Representatives approved a bill that could force China-based ByteDance to divest its stake in the popular short video sharing app TikTok. 

The move follows after Chinese security agencies stepped up arbitrary enforcement of the recently expanded espionage rules on foreign companies operating in China. 

Tencent Holdings, Alibaba.com Group, JD.com, and Baidu Inc. dropped between 0.5% and 1.2%. 

Property companies were in focus in the hopes that China-controlled funds would step up investing in struggling real estate developers. 

Moreover, Hangzhou city loosened its restrictions on the sale of existing homes, and Guangdong province capital Guangzhou approved a second list of 116 properties that are likely to receive financial help and support for the completion and sale of apartments. 

Longfor Group, China Resources Land, and China Vanke jumped between 2% and 4% on the hopes of more financial measures from the government-controlled entities. 

 

India Indexes Struggle Amid Stretched Valuation 

India stocks traded down, and market indexes extended weekly losses amid worries of tighter regulatory scrutiny in small and mid-cap stocks. 

The Sensex and the Nifty indexes declined and extended 2-day losses to more than 1.4%. 

Sebi chairman Madhabi Puri Buch highlighted the need to crack down on market manipulation activities targeting small and mid-cap stocks. 

Puri's comments sent market indexes down by more than 1% in Wednesday's trading. 

Market sentiment was cautious for the second consecutive day amid ongoing global interest rate uncertainties, stretched domestic market valuations, and a lack of additional net flows from foreign investors. 

Moreover, international companies have stepped up selling stakes in their Indian subsidiaries to take advantage of sky-high valuations. 

British American Tobacco was the latest company to announce the sale of a stake in its Indian unit, ITC. 

The Sensex index decreased 0.2% to 72,570.10, and the Nifty index edged down 0.1% to 21,982.55. 

On the Mumbai stock exchange, 13 stocks traded at their 52-week highs and 59 stocks traded at their 52-week lows.

Reliance Industries declined 2.6% to ₹2,873.20, and the company agreed to acquire the remaining 13% stake held by the U.S.-based Paramount Global in Viacom18 Media Pvt Ltd. for ₹4,286 crore, or $517 million. 

Tata Motors decreased 4.3% to ₹973.15, and the company signed a preliminary agreement with the Tamil Nadu government to invest 9,000 crore, or $1.1 billion, in a vehicle manufacturing facility.