Asia News Jun 30

Sentiment lifted by China data and  upgrade of Japan equities

Japan's industrial production plunged in May, but analysts say it should recover over coming months, while Japanese stocks also got a thumbs up from BlackRock

by Umesh Desai
Sentiment lifted by China data and upgrade of Japan equities
Japan’s Nikkei 225 was up 1.62% early today, despite weak employment numbers and a decline in industrial production. But the labour force is tipped to rebound over coming months. File photo by AFP.

(ATF) Asian markets are trading with an upbeat undertone after China’s factory data showed the economic recovery was on track, although the momentum was seen losing steam in coming months.

China’s official manufacturing PMI rose to 50.9 in June from 50.6 in May, outpacing the consensus estimate of 50.5.

“China’s return to growth may occur sooner than we had expected, as soon as the second quarter,” Vanguard Group said in a note. “Our China economists expect a greater external demand shock for China’s export industries in the second half of the year.”

Japan’s Nikkei 225 is up 1.62%, despite weak employment numbers and a larger-than-expected decline in Japanese industrial production.

“The labour force should continue to rebound over the coming months as many more who lost their jobs during the state of emergency start looking for employment again. That should push the unemployment rate up to around 4% by the end of the year,” Tom Learmouth, Japan Economist at Capital Economics, said.

“And while industrial production plunged again in May, it should also recover over the coming months.”

Japanese stocks also got a thumbs up from BlackRock, which raised its recommendation on the asset class to neutral.

'Well positioned'

“We believe that Japan is well positioned from a broad policy perspective to recover relatively quickly from the virus downdraft. The combination of domestic policy support, a relatively benign virus experience, and gearing into the global economic recovery can translate into Japan Equities performance,” said Ben Powell, Chief Investment Strategist, APAC, BlackRock Investment Institute.

Elsewhere in the region South Korea’s Kospi is up 1.72%, Australia’s S&P ASX 200 is 1.44% higher and Hong Kong’s Hang Seng index has climbed 0.9%. Mainland China’s CSI300 benchmark has advanced 1.1%.

Credit markets remain busy with new issues from Weibo IncKorea Housing Finance, and JG Summit expected to price during the day. CDS spreads are broadly tighter with the Asia IG index moving in by one basis point to 85/87 and the sovereign CDS spreads narrowing by 1-2 bps.

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