Markets

Nikkei, Hang Seng Edge Ahead Despite Recession, Banking Fears

An electric monitor displays the exchange rate between the Japanese yen against the US dollar along with Shanghai and Shenzhen stock prices in Tokyo.

Asia’s major stock indexes saw a day of subdued trading on Thursday and, while there were gains across the board, the advances were capped by worries over a US recession, a possible banking crisis and superpower tensions.

In particular, troubles at US lender First Republic Bank continued to unnerve investors amid concerns that growth in the world’s biggest economy could go into reverse.

Japan’s Nikkei share average recovered from an earlier fall led by steep declines for heavyweights Nomura Holdings and Advantest following dour earnings reports.

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Japan’s biggest brokerage and investment bank Nomura plunged 7.09% after posting a 76% drop in quarterly profit on Wednesday after market hours.

And chip-testing equipment maker Advantest sank more than 11%, its steepest drop in almost three years, after its earnings forecast missed market expectations.

But after the bargain-buyers moved in and, with investors looking to Japan’s central bank first meeting under new governor Kazuo Ueda which began on Thursday, the Nikkei share average edged up 0.15%, or 41.21 points, to close at 28,457.68.

The broader Topix was ahead 0.43%, or 8.61 points, to 2,032.51.

China and Hong Kong stocks edged up too as investors continued to weigh geopolitical tensions and industrial profits data to gauge the pace of China’s economic recovery in the midst of the earnings season.

China’s industrial firms’ profits shrank at a slightly slower pace in January-March but the decline remained in double digits as the economy struggled to fully recover after the exit from its zero-Covid policy.

Citi analysts said industrial profits print showed that despite a rebound in economic growth, demand for manufactured goods remained poor.

Huawei Cloud Curbs Threat

And tensions with the United States continued as US Commerce Secretary Gina Raimondo said that Chinese cloud computing companies like Huawei Cloud and Alibaba Cloud could pose a threat to US security and vowed to review a request to add them to an export control list.

Nevertheless, the Shanghai Composite Index rose 0.67%, or 21.78 points, to 3,285.88, while the Shenzhen Composite Index on China’s second exchange edged up 0.12%, or 2.40 points, to 2,027.47.

Tech stocks traded in Hong Kong dropped 0.8%, with Alibaba and Tencent down 2.4% and 1.6%, respectively. But the Hang Seng Index gained 0.42%, or 83.01 points, to 19,840.28.

Elsewhere across the region, Seoul, Taipei, Mumbai, Jakarta, Manila and Kuala Lumpur were all up, while Sydney, Wellington, Bangkok and Singapore were down.

MSCI’s broadest index of Asia-Pacific shares outside Japan skidded 0.2%.

First Republic Value Sinks

The caution was set to extend to Europe, with pan-region Euro Stoxx 50 futures sliding 0.3%. Nasdaq futures, however, gained 0.6% as Facebook owner Meta soared 12% after the bell with its earnings beat, and S&P 500 futures rose 0.3%.

Overnight, the woes of First Republic Bank continued, with its market value briefly sinking as much as 41% to about $888 million, a far cry from its peak of more than $40 billion in November 2021.

Investors are waiting to see whether it can find buyers for assets and engineer a turnaround after CNBC reported that US government officials are currently unwilling to intervene.

Overnight, the S&P 500 and the Dow were pulled lower by weakness in economically sensitive sectors, hinting at mounting recession jitters.

In the currency markets, the euro edged 0.1% higher to $1.1054, moving closer to its highest level in over a year of $1.1095 hit just a day ago. It has benefited from bets that the economic outlook for Europe could be on the upside after Germany raised its economic forecast for growth this year.

US Treasuries Advance

The dollar index, which measures the currency against six major rivals, eased 0.1% to 101.3, on top of a 0.4% decline overnight, due to fresh concerns over a US slowdown.

US Treasuries yields mover slightly higher, with the two-years up 3 basis points to 3.953%, and ten-years up 2 bps to 3.4504%. One-month Treasury yields tumbled ahead of a possible Washington vote on the US debt ceiling.

Oil recovered some ground on Thursday after tumbling almost 4% on recession fears. US crude futures edged up 0.1% to $74.4 per barrel, while Brent crude futures rose 0.3% to $77.90 per barrel.

Gold gained 0.5% to $1,990.04 per ounce.

Key figures

Tokyo – Nikkei 225 > UP 0.15% at 28,457.68 (close)

Hong Kong – Hang Seng Index > UP 0.42% at 19,840.28 (close)

Shanghai – Composite > UP 0.67% at 3,285.88 (close)

London – FTSE 100 > UP 0.04% at 7,855.77 (0939 GMT)

New York – Dow < DOWN 0.68% at 33,301.87 (Wednesday close)

Reuters with additional editing by Sean O’Meara

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Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.