Asia report: Markets mixed as China unveils consumption boost policy

(Sharecast News) - Asia-Pacific finished with a mixed performance on Wednesday, influenced by Wall Street's overnight decline as rising US Treasury yields and falling tech stocks weighed on sentiment. The stronger dollar, driven by higher yields, pushed the Chinese onshore yuan to a 16-month low.

"Asian markets declined, mirroring the moves in the US overnight, as concerns about rising inflation led to a selloff in Treasuries and a negative sentiment towards China influenced market dynamics as trade tariffs from the incoming Trump administration remain a concern," said TickMill market strategy partner Patrick Munnelly.

"MSCI's regional equities index is set to post its largest single-day decline in over two weeks, erasing gains made on Tuesday.

"China's main stock index has plunged to its lowest level since September, fuelled by ongoing investor anxiety about the potential for increased US tariffs."

Munnelly noted that the S&P 500 dropped by more than 1% overnight following a report that revealed inflation among US service providers had reached its highest point since early 2023.

"Economic worries are dampening investor confidence across Asia, particularly in China, where there are growing fears of a potential deflationary spiral.

"This concern is compounded by credit yield premiums nearing their lowest levels since the global financial crisis, causing scepticism about investor appetite for a surge of deals in global debt markets.

"In China's $11trn government bond market, investor sentiment has turned increasingly pessimistic, with 10-year bond rates recently hitting all-time lows, falling over 300 basis points below those of the US, even after the Chinese government, led by president Xi Jinping, announced several economic stimulus measures."

Markets mixed after weak session on Wall Street overnight

In Japan, the Nikkei 225 declined by 0.26% to close at 39,981.06, while the Topix dropped 0.59% to 2,770.00.

Key underperformers on Tokyo's benchmark included Tokio Marine Holdings, which fell 4.06%, Japan Exchange Group, down 3.93%, and Omron Corporation, which slid 3.9%.

China's Shanghai Composite edged up by 0.02% to 3,230.17, supported by strong gains in Fujian Dongbai Group, Suzhou MedicalSystem Technology, and Shanghai Smith Adhesive New Material, all up over 10%.

However, the Shenzhen Component dipped 0.54% to 9,944.64, reflecting broader market caution.

Hong Kong's Hang Seng Index fell 0.86% to 19,279.84, pressured by losses in Sunny Optical Technology Group, which plunged 7.58%, and Techtronic Industries, down 4.72%.

South Korea saw robust gains, with the Kospi 100 rising 1.33% to 2,529.97, driven by Hanmi Semiconductor's 14.31% surge, alongside double-digit gains in SKC and Yuhan.

In Australia, the S&P/ASX 200 advanced 0.77% to 8,349.10, buoyed by a 5.41% rise in Regis Resources and strong performances from Westgold Resources and Neuren Pharmaceuticals.

Across the Tasman Sea, New Zealand's S&P/NZX 50 was virtually flat, up just 0.01% to 13,043.11, with Synlait Milk leading gains at 4.88%.

In currency markets, the dollar was last up 0.14% on the yen to trade at JPY 158.27, while it rose 0.26% against the Aussie to AUD 1.6092, and climbed 0.32% on the Kiwi, changing hands at NZD 1.7804.

The Chinese onshore yuan fell to a 16-month low of CNY 7.3316 against the dollar, driven by a strengthening greenback after US Treasury yields rose overnight.

According to CNBC, renminbi had depreciated in five of the last six trading days, losing over 0.44% since its 31 December 31 closing level of CNY 7.2993.

Oil prices moved higher, with Brent crude futures last up 0.73% on ICE at $77.61 per barrel, and the NYMEX quote for West Texas Intermediate rising 1.02% to $75.01.

China unveils consumption boost plan, consumer inflation hastens in Australia

In economic news, China took the wraps off an updated policy to boost domestic consumption through expanded equipment upgrades and trade-in subsidies on Wednesday.

The programme would increase the subsidy for new energy vehicle purchases from CNY 60,000 to CNY 80,000, and expand household allowances for subsidised air conditioner purchases from one unit to three.

Eligible products would now include microwaves, washing machines and smartphones retailing at CNY 6,000 or less, with discounts of up to 15%.

Both domestic and foreign phone brands would qualify.

Chinese officials reported that CNY 81bn had already been allocated for the current year's trade-in programme, with full-year support details to be finalised at March's annual parliamentary meeting.

Total funds for 2025 were expected to surpass last year's allocation of CNY 300bn across subsidies and equipment upgrades.

In Australia, annualised consumer price inflation (CPI) rose to 2.3% for the 12 months through November, slightly above the 2.2% expected by analysts, according to the Australian Bureau of Statistics.

That marked an increase from October's 2.1% rise.

Higher food and non-alcoholic beverage costs were the main contributors, while declines in electricity and automotive fuel prices tempered the overall increase.

Trimmed mean inflation, which excludes volatile items such as fuel, slowed to 3.2% annually from 3.5% in the prior month, signalling a potential moderation in core inflation.

Reporting by Josh White for Sharecast.com.