Asian markets mixed as US-China tariffs take effect

Asian markets were mixed Monday as new US-China tariffs took effect and several countries reported economic data for the last month.

China’s Shanghai Composite Index rallied 1.3% to close the day higher. It was lifted by defense and infrastructure stocks. Newly released economic figures were also unexpectedly positive.

The shipbuilding and aerospace industries were the best performers on the market. China has said it will showcase new equipment and weaponry at a military parade meant to celebrate the 70th anniversary of the founding of the People’s Republic of China on October 1.

The defense sector is expected to outperform the broader Shanghai Composite Index this month, according to analysts at China Galaxy Securities, an investment firm.

Infrastructure shares also jumped. New private survey data released Monday showed China’s manufacturing sector expanded in August to a five-month high.

The data, released by the media group Caixin, suggests that strong infrastructure spending is propping up factory activity in China, according to Julian Evans-Pritchard, senior China economist at Capital Economics.

But long-term concerns remain an issue as exports continue to struggle.

The latest round of tariffs that the United States and China imposed on each other went into effect Sunday — a round that came as concerns about slowing global growth are building and fear of recession stalks several major economies. Investors and executives around the world are also waiting to see when the two economic superpowers will come back to the negotiating table.

The outlook for global demand is still cloudy, Evans-Pritchard wrote in a research note.

Over the weekend, government figures showed a contraction in the manufacturing industry.

The manufacturing indexes are consistent with a slowdown in year-on-year economic growth, he said, adding that Chinese authorities will have “little choice” but to ease policy in the coming months to offset the tariff impact.

Among other major indexes, Hong Kong’s Hang Seng Index lost 0.4%, while Japan’s Nikkei also fell 0.4%.

South Korea’s Kospi ticked up by less than 0.1%.

Here are the other big moves at 4:15 p.m. Hong Kong time:

Newly released factory activity from Japan pointed to a continued downturn in the country’s manufacturing sector. “The sector was plagued by production cutbacks and flagging demand, which have been the trends so far in 2019,” said Joe Hayes, an economist at IHS Markit, in a note. “Softer growth across Asia, particularly in China, was reported to have dented export opportunities.”
South Korea’s manufacturing activity contracted in August at a slower pace than it did in July, according to data released Monday.
The yuan weakened in both onshore and offshore trading. The Chinese central bank fixed the yuan at 7.0883 per one US dollar on Monday, slightly weaker from Friday’s 7.0879.