Asian Stocks Pull Higher On Weak China Data

Most Asian markets ended higher Thursday as China’s cooling inflation and weak economic data strengthened expectations Beijing will act to support growth.

South Korea’s Kospi SEU led the advance, jumping 2.1%, Taiwan’s Taiex gained 1.6%, Japan’s Nikkei Stock Average 100000018 rose.1.1% and Hong Kong’s Hang Seng Index HSI added 1%.

The Shanghai Composite Index 000001 advanced 0.6%, stretching its winning run to a fifth straight session.

Australia’s S&P/ASX 200 XJO ended 0.1% lower, as shares of Telstra Corp. and News Corp. after their earnings reports offset a jump in Rio Tinto Ltd. shares after posting strong half-yearly results.

Data released Thursday showed China’s consumer price inflation rose 1.8% in July, slowing from a 2.2% increase recorded in June, while July wholesale prices contracted at a sharper rate than in the preceding month. Monthly retail sales and industrial production also rose less than expected. Read more on Chinese economic data.

“This [consumer] inflation deceleration doesn’t necessarily reflect a hard landing, but confirms our view that around 150 basis points of cuts to the [bank] reserve requirement ratios by year-end can be expected, complemented by two more 25-basis-point cuts to the policy rates,” said Annette Beacher, head of Asia-Pacific research at TD Securities. Read China data first take.

“Poor macro data signals that the authorities continue to struggle in reviving growth… The government needs to transform its current stimulus push into a stimulus punch,” IHS Global Insight economists Xianfang Ren and Alistair Thornton wrote in a note to clients.

Commodity-related firms, which depend on consumption for materials in China, gained across most the region.

Aluminum Corp. of China Ltd. 2600 ACH gained 2.4% and Jiangxi Copper Co. 358 JIXAY rose 3.7% in Hong Kong; JFE Holdings Inc. 5411JFEEF climbed 4% and Inpex Corp. 1605IPXHF added 1.4% in Tokyo, and BHP Billiton Ltd. BHP  BHP advanced 1.6% in Sydney.

Also in Sydney, shares of Rio Tinto Ltd. RIO  RIO jumped 3.6%, getting an extra boost after announcing first-half results late Wednesday. Read more on Rio Tinto earnings.

But shares of Telstra Corp. TLS TTRAFfell 2.3% after reporting earnings. Read more on Telstra earnings.

Shares of News Corp. NWS NWS tumbled 3.2%, as the media giant swung to a fiscal fourth-quarter net loss of $1.55 billion after taking a multi-billion dollar write-down. The firm reported a profit of $683 million in the year-ago period. Read more on News Corp.

News Corp. is the parent of MarketWatch, the publisher of this report.

Earnings also weighed a bit in Japan, as camera maker Nikon Corp. 7731 NINOF plunged 8.1% after cutting its fiscal-year operating profit guidance late Wednesday, a move that mainly reflected changed foreign-exchange assumptions.

The Japanese central bank Thursday warned of moderation in exports and recently weak production, but kept its interest-rate target and asset-buying programs unchanged. Read more on Bank of Japan decision.

The Bank of Korea, meanwhile, also left its key policy interest rate unchanged Thursday, after a surprise cut last month — its first in more than three years. However, economists widely expect the bank to introduce fresh policy easing later this year. Read more on Bank of Korea decision.

Elsewhere in the region, India’s Sensex dropped 0.4% in afternoon trading, after data showing the country’s industrial production for June unexpectedly contracted 1.8% from the year-ago period, dashing hopes for a mild, 0.8% increase.

“This was another shocking industrial production release from India… [and] rounds off what we estimate to be the country’s worst quarter-on-quarter contraction in industrial production since January-March 2009, when the financial crisis was still unraveling,” said Robert Prior-Wandesforde, director for Asian economics at Credit Suisse.

The data will “inevitably heap more pressure on the central bank to restart its rate cutting,” he added.

Shares of Bharti Airtel Ltd. 532454 tumbled 5.3% as some brokers downgraded the stock a day after its quarterly earnings disappointed.

Among other major decliners, shares of State Bank of India 500112 dropped 3.8% and heavyweight Reliance Industries Ltd. 500325 shed 1.4%.

Marketwatch