Japan Indexes Close at New Record Highs, China Indexes Extend 3-year Losses

Arjun Pandit
22 Mar, 2024
Sydney

The Asian market closed mixed after a week of volatile trading, and major central banks' monetary policy announcements dominated news flow. 

Despite the Bank of Japan ending its negative interest rate policy, the yen hovered near a three-decade low, but stocks scaled new 34-year highs. 

Stocks in China continue to struggle after a slew of weak corporate earnings amplified market worries about macroeconomic conditions and weak consumer sentiment. 

Market indexes in India hovered near record highs, but investors turned cautious on high valuation worries ahead of the national election in early May. 

 

Japan Stocks Extend Weekly Gains to 6% 

Benchmark indexes in Tokyo extended weekly gains after positive sentiment in Friday's trading. 

Market indexes advanced after consumer price inflation and core inflation, which excludes volatile food and energy prices, rose to a four-month high of 2.8%. 

The inflation report confirmed the Bank of Japan's latest move to end negative rates and hike its benchmark interest rate for the first time in 17 years. 

However, Japan's future rate path is uncertain, and the central bank is expected to keep an accommodative stance in the near future, which could add more volatility to the yen. 

The Nikkei 225 Stock Average gained 0.2% to 40,914.29, and the Topix index advanced 0.5% to 2,811.21. 

For the week, the Nikkei advanced 5.7% and the Topix gained 5.4%. 

The yen hovered near 151 against the U.S. dollar as investors worried that the large rate differential between the two currencies was likely to persist well into 2025. 

Technology, financial services, and automotive sector stocks were among the leading gainers. 

Tokyo Electron, Advantest, Screen Holdings, SoftBank, Mitsubishi UFJ, Mitsui & Company, Marubeni, Toyota Motor, and Honda Motor advanced between 0.5% and 3%. 

 

China Indexes Plunge After Weak Earnings 

Stocks in Shanghai and Hong Kong dropped sharply after a slew of corporate earnings missed investors' expectations. 

Benchmark indexes wiped out this week's gains after investors shifted their focus to corporate earnings following the Chinese government's policy measures and the U.S. Federal Reserve's dovish interest rate outlook. 

Investors have been on the edge amid growing worries that corporations may face challenging times over the next several years as the authoritarian Chinese government announced plans to support government-controlled companies at the expense of the private sector. 

Moreover, the Chinese leadership has repeatedly stressed that national security and international military expansion are higher priorities than domestic economic development. 

At lunch break, the CSI 300 index dropped 1.5% to 3,527.58, and the Hang Seng index plunged 3% to 16,350.56. 

Ping An Insurance plunged 7.5% to HK$33.0 after China's largest insurance company by market capitalization said 2023 net income declined 23% from a year ago after the weaknesses in its asset management and technology units outweighed the strength in its core insurance business. 

CNOOC Ltd., the offshore energy driller, plunged 5.6% to HK$17.20, and Orient Overseas, the international shipping company, plunged 15% to HK$101.70 after both companies reported weaker-than-expected earnings. 

Samsonite International dopped 8.9% to HK$27.95 after the luggage maker announced its plans for a secondary listing and ended its discussions to go private. 

CK Hutchison Holdings declined 3.7% to HK$38.90 after the port-to-telecom company reported 2023 earnings from continuing operations declined 9% from a year ago. 

CK Asset Holdings Ltd. plunged 11.8% to HK$32.45 after the listed property arm controlled by billionaire Li Ka Shing reported a 11.6% decline in 2023 profit. 

For the week, the CSI 300 decreased 1% and the Hang Seng index dropped 1.7%, extending their 3-year losses to 39.6% and 46%, respectively. 

 

Major Central Banks Announce Rate Decisions This Week

The U.S. Federal Reserve held its interest rates steady for the fifth time in a row and reiterated its target of three rate cuts in 2024. 

After the announcement, market indexes in the U.S., Europe, Japan, India, South Korea, and Hong Kong jumped between 1% and 2.3%. 

The Bank of England held its interest rate steady at 5.25%, and the Norges Bank left its policy rate of 4.5% unrevised. 

However, the Swiss National Bank unexpectedly cut its policy rate by 25 basis points to 1.5% and signaled economic growth of around 1% in the current year. 

The SNB is the first major central bank to end its policy tightening bias. 

Turkey's central bank hiked its interest rate by a large 500 basis points to 50% from 45% after inflation in February soared to 67%. 

Turkey has been battling high inflation for more than three years, and after several reversals in monetary policy direction, the central bank lifted its benchmark rate by a whopping 36.5 percentage points between May 2023 and January 2024. 

Earlier in the week, the Bank of Japan ended its negative rate policy and lifted interest rates for the first time in 17 years. 

 

India Indexes Struggle Amid Cautious Trading 

Benchmark indexes in Mumbai lacked direction in Friday's trading as investors reviewed monetary policy decisions from major central banks. 

The Sensex and the Nifty indexes edged higher in early trading following a surge of more than 1% in the previous session after the U.S. Federal Reserve held its interest rates steady for the fifth time in a row and reiterated its target of three rate cuts in 2024. 

After the announcement, market indexes in the U.S., Europe, Japan, India, South Korea, and Hong Kong jumped between 1% and 2.3%. 

The Sensex index decreased 0.3% to 72,432.17, and the Nifty index edged down 0.2% to 21,956.15. 

For the week, the Sensex and the Nifty indexes are set to close down 0.3%.