Asian Shares Rise as Quarter Ends
Asian stock markets continued to travel in different directions during the first quarter of this year but did so in unexpected ways—investors soured on China and Japan and returned to the fast-growing economies of Southeast Asia.
This marked a reversal of a key investment trend from late last year. Investors bet then that the economies of North Asia were positioned to benefit as the global economy gained steam, while emerging markets in Southeast Asia, particularly those with current-account deficits, would struggle as the U.S. Federal Reserve wound down its extraordinary monetary stimulus.
Instead, the Nikkei Stock Average has suffered its worst quarter in nearly two years, while the Shanghai and South Korean benchmarks are both in the red for the quarter. Meanwhile, shares in Indonesia and the Philippines are the region's best performers.
"In a way, the first quarter has been a bit perverse," said Shane Oliver, head of investment strategy and chief economist at AMP Capital in Sydney. "The emerging-market worries which had led some to focus more on countries with current-account surpluses haven't really panned out that way."
The key concern has been China. A string of disappointing economic data and bad corporate news has weighed on stocks and commodities. On the economic front, China's growth has slowed and there are signs of cooling in the property market. In addition, the country saw its first corporate bond defaults—raising fears of a surge in defaults.
Stocks in Hong Kong have fallen 5.1% for the quarter, while the Shanghai benchmark is down 3.7%.
In Japan, the Nikkei is down 9%, as the market pulled back from an extraordinary 57% rally in 2013. Sentiment toward Japanese shares has soured due to concerns about the impact of a higher sales tax that will take effect on Tuesday.
"The tax hike has been cited as a central factor behind much of the capital flight from Japan stocks over the last few weeks, but is now almost totally factored into the market," said Hiroichi Nishi, general manager of equities at SMBC Nikko Securities.
In contrast, markets in Indonesia and the Philippines have enjoyed healthy gains, rising 11.6% and 8.8%, respectively. Investors returned to these markets after fleeing last year ahead of the beginning of the Fed winding down its stimulus. Indonesia, in particular, has rebounded following a slew of data that showed the country's trade balance improving, inflation declining and foreign-exchange reserves swelling.
On Monday, Asian stocks maintained the positive momentum from last week ahead of the release of a wide range of economic data in coming days. On Tuesday, China will release its official manufacturing data for March and Australia's central bank will make a decision on interest rates, while at the end of the week attention will be on the monthly U.S. labor report.
Japan's Nikkei gained 0.9% to 14827.83 after the dollar gained 0.6% against the yen on Friday, before stabilizing on Monday. The greenback was last at ¥102.84. The Philippines PSE added 0.7% and Australia's S&P/ASX 200 added 0.5% to 5394.80, while South Korea's Kospi rose 0.1%.
In China, Hong Kong's Hang Seng Index rose 0.2% and the Shanghai Composite Index slipped 0.2%.
Chinese banks were in focus after China Construction Bank 601939.SH +0.25% reported that full-year profit beat estimates, rising 11.1% on the previous year. Its shares rose 0.9% in Hong Kong.
Also in Hong Kong, shares in lender Harbin Bank were unchanged in debut trading. Harbin Bank last week priced shares in its $1.1 billion initial public offering near the bottom of the proposed range.