• The Bank of Japan’s quarterly Tankan survey reflected that business sentiment had improved, with the big manufacturers’ index coming in at +17, compared with +15 forecast.
  • China Caixin manufacturing PMI for June came in higher than expected after official manufacturing PMI also beat expectations.
  • A “bond connect” program allowing Hong Kong investors to trade in China’s fixed income markets will be trialed on Monday.

Asia markets were mixed in Monday trade, as markets digested key economic indicators out of China and the Bank of Japan’s quarterly tankan survey.

Japan’s Nikkei 225 rose 0.24 percent and South Korea’s Kospi advanced 0.04 percent. Australia’s S&P/ASX 200 was flat.

Markets in greater China fell modestly. Hong Kong’s Hang Seng Index edged lower by 0.09 percent. The Shanghai Composite was off by 0.16 percent and the Shenzhen Composite slid 0.032 percent.

26.78 0.13%
HSI HSI 25746.30
-18.28 -0.07%
ASX 200 S&P/ASX 200 5725.50
4.01 0.07%
SHANGHAI Shanghai 3181.57
-10.86 -0.34%
KOSPI KOSPI Index 2391.45
-0.34 -0.01%
CNBC 100 CNBC 100 ASIA IDX 7698.58
-12.44 -0.16%

Caixin manufacturing PMI for the month of June came in at 50.4, above the 49.5 forecast from Reuters. Manufacturing activity was at a three-month high, Reuters said. Official manufacturing PMI released on Friday came in at 51.7, higher than the 51.0 forecast by Reuters, marking a faster-than-expected expansion.

The Australian dollar, which is sensitive to Chinese economic data, briefly dipped to trade at $0.7676 following the news but mostly recovered to trade at levels seen before. The Aussie dollar traded at $0.7682 at 10:00 a.m. HK/SIN.

Market participants also eyed a “bond connect” program allowing Hong Kong investors to trade in China’s fixed income market. A press release on the Hong Kong Monetary Authority (HKMA) website stated that trial operations of “northbound” trade began on Monday. HSBC said it had completed its first trade on the “bond connect” just after 9:00 a.m. HK/SIN, Reuters reported.

In a note on Hong Kong Exchanges and Clearing, the operator of Hong Kong’s stock exchange, Nomura analysts Haifeng Cao and Shengbo Tang maintained their “Reduce” rating on the company. They said the new “bond connect” was unlikely to contribute much to revenue and that derivatives products will be “more meaningful for the HKEx.”

“What is meaningful is the capital brought into the Hong Kong market gradually and the associated demand for the derivative products, i.e. interest rate and currency products,” they added.

Meanwhile, the Bank of Japan’s quarterly tankan survey reflected that business confidence had improved. The big manufacturers’ index registered a score of +17, compared with the forecast of +15.

Central bank speakers could continue to impact on markets this week after comments from various officials at the European Central Bank, Bank of Canada and Bank of England resulted in currency moves last week, said National Australia Bank Head of FX Strategy Ray Attrill in a Monday morning note.

The Reserve Bank of Australia is expected to announce its decision on interest rates on Tuesday. Several ECB officials and the president of the Deutsche Bundesbank were due to speak over the course of this week.

“We very much doubt the euro will be ending this week where it started,” Attrill said.

The euro, which hit a fourteen-week high against the dollar last week, fetched $1.1417 at 9: 30 a.m. HK/SIN.

In corporate news, private equity firms TPG Capital and Hellman & Friedman have reportedly dropped their bids to take over Australia’s Fairfax Media, Reuters said. Shares of Fairfax sank 11.82 percent following the news.

Gaming stocks traded in Hong Kong were in negative territory in early trade despite news that gaming revenues had risen for an eleventh consecutive month. Wynn Macau was down 3.84 percent, Sands China fell 2.24 percent and Melco International Development slid 3.11 percent.

In currency news, the dollar index, which measures the greenback against a basket of currencies, traded near nine-month lows first hit last week. The dollar traded at 95.678 at 9:57 a.m. HK/SIN. Against the yen, the dollar continued to trade above the 112 handle, with the greenback fetching 112.35 yen.

In energy news, oil prices rose, with Brent crude futures up 0.23 percent at $48.88 a barrel and U.S. crude futures higher by 0.41 percent at $46.23.

Stocks closed mostly higher in the U.S. on Friday, with the Dow Jones industrial average adding 0.29 percent, or 62.6 points, to close at 21,349.63. Markets in the U.S. will close early on Monday for the eve of Independence Day.

By Cheang Ming


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