Asian stocks up as concerns over China slowdown ease

Asian stock markets were broadly higher Thursday, backed by easing of fears about a sharp slowdown in China, while caution remained over the outlook for emerging-market economies.

Concerns about a sharp slowdown in the global economy are abating somewhat. China’s manufacturing data for September were largely steady from the previous month. On Wednesday, data also showed U.S. private-sector payrolls in September rose at a pace that matched expectations.

Japan’s benchmark Nikkei Stock Average NIK, +1.92% closed up 1.9%. Australia’s S&P/ASX 200 XJO, +1.80% ended 1.8% higher. Korea’s Kospi was up 0.8%. China and Hong Kong markets are closed for national holidays.

“I expect [Japanese] stocks to begin recovering because they are now undervalued,” said Hisao Matsuura, chief strategist at Nomura Securities. “If we start talking about risks, though, we could go on forever. Emerging market economies aren’t great.”

China’s official manufacturing purchasing managers index for September rose to 49.8 from 49.7 in August. Economists expected that index to remain unchanged. The Caixin China manufacturing purchasing managers index was at a six-and-a-half year low of 47.2 in September, compared with a preliminary figure of 47.0 and 47.3 in August. Readings below 50 still indicate a contraction in manufacturing activity.

Strategists say there are still some concerns about the Chinese banking sector because of potential bad loans stemming from lower commodity prices.

Yukino Yamada, senior strategist for Asia excluding Japan at Daiwa Securities, said the focus will be on China’s potential policy steps to boost its economy, expected to be announced after the National Day holidays.

“Once China’s consumption picks up steam, leading to higher commodity consumption and prices, weights on financial stocks may be removed and expectations may also increase that policy steps taken by many others countries will start working,” Yamada said.

Meanwhile, the Bank of Japan’s latest corporate survey showed Thursday that big manufacturers turned more cautious about the economy over the third quarter, underscoring challenges facing exporters because of China’s economic slowdown.

The BOJ survey’s main index measuring the mood among big manufacturers about present business conditions fell to plus 12 from plus 15 in June, despite record-high profits for Japanese firms.

Source: MarktWatch