Asia Stocks Rise As Dismal China Data Spur Hopes

Most Asian markets rebounded from a weak start Monday as a sharp deterioration in Chinese manufacturing conditions fueled hopes that Beijing will act to support the economy, although a strengthened yen hurt Japanese shares.

“The Chinese government is definitely not going to sit aside,” said Peter Lai, a director at DBS Vickers in Hong Kong.

“I do believe that stability is of utmost importance to the Chinese government, and measures will be implemented after the 18th [Communist Party] Congress, supposed to be held in September or the fourth quarter this year,” Lai said.

The Shanghai Composite Index 000001 +0.57% was up 0.5%, and Hong Kong’s Hang Seng Index HSI +0.61% 0.3% higher in afternoon trading.

Both markets had declined in the previous three trading days, and both opened lower on Monday after government data released by the China Federation of Logistics & Purchasing (CFLP) over the weekend showed the country’s manufacturing activity deteriorated in August.

A privately-compiled survey by HSBC released Monday also showed separately that business conditions for Chinese manufacturers weakened sharply in August from the preceding month.

But the weak figures strengthened expectations for policy stimulus from the world’s second-largest economy. Read full story on China manufacturing data.

Also supporting sentiment, data released Monday by the CFLP showed China’s Purchasing Managers’ Index for the non-manufacturing sector improved to 56.3 in August, 0.7 percentage points higher than in the previous month.

DBS Vickers’ Lai said the non-manufacturing PMI was “very encouraging” and shows Beijing “knows how to control demand-supply in a flexible and targeted way.”

Also overcoming early losses in the wake of the Chinese data, South Korea’s Kospi SEU -0.07% gained 0.4%, Australia’s S&P/ASX 200 XJO +0.32% added 0.2% and Taiwan’s Taiex climbed 0.7%.

But Japan’s Nikkei Stock Average 100000018 -0.63% finished 0.6% lower, unable to latch on to gains recorded earlier in the day.

Among stock movers, Chinese financials rebounded in Hong Kong after trading mostly lower in initial action. Bank of China Ltd. 3988 +0.71%BACHY -0.66% rose 0.4%, and Industrial & Commercial Bank of China Ltd. 1398 -0.59%IDCBF +6.94%601398 -1.31% gained 0.5%.

In Shanghai, property developers were leading the advance, with Poly Real Estate Group Co. 600048 +7.65% rallying 6.5% and Gemdale Corp. 600383 +4.18% 4% higher.

In Tokyo, exporters were weak on a firmer yen, although many pared losses. Sony Corp. 6758 -0.57%SNE -1.05% fell 0.6% and Panasonic Corp. 6752 -2.63%PC -0.44% dropped 2.6%.

Sharp Corp. 6753 -6.06%SHCAF -10.96% tumbled 6.1% after Standard & Poor’s on Friday cut the company’s credit rating to speculative or “junk” grade, citing weak liquidity.

Meanwhile, a Nikkei news report cited the Japanese conglomerate’s president as saying a final deal for an investment from Taiwan’s Hon Hai Precision Industry Co. 2317 -0.32% HNHPF -5.69% has been delayed due to questions about an overall Sharp-Hon Hai business alliance, rather than issues surrounding the prices. Read more on Sharp president’s comments.

Shares of Hon Hai rallied 6.1% in Tapiei, while listed subsidiary Foxconn International Holdings Ltd. 2038 +4.10%FXCNF -5.71% added 2.6% in Hong Kong, after Hon Hai posted a 0.5% gain in first-half net profit from a year earlier despite booking a large loss on its investment in Sharp.

Shares of Japanese retail major Seven & I Holdings Co. 3382 +1.81%SVNDF -1.09% added 1.8% after a Nikkei report saying the company planned to ramp up its shopping-mall openings. Read more on Seven & I’s reported plans for more mall openings.

Among Japanese financials, Nomura Holdings Inc. 8604 +2.33%NRSCF -11.81% NMR +4.39% climbed 2.3% after a Nomura executive said Friday the broker would seek to cut $1 billion in costs by March 2014. Read more on Nomura cost-cutting announcement.

In Seoul, shares of Samsung Electronics Co. 005930 +1.48%SSNLF +5.36% fell 1.2% after Apple Inc. AAPL +0.21% added the Galaxy S III, the Korean firm’s flagship smartphone, to a U.S. patent dispute, according to a Wall Street Journal report Friday.

A surge Friday in gold futures sent Austraila’s Newcrest Mining Ltd. NCM +0.60%NCMGF -0.65% rising 1.5%, while Hong Kong-listed shares of Zijin Mining Group Co. 2899 -1.03%ZIJMF +7.95% soared 5.4%.

Marketwatch