Asian Stocks Weigh Mixed China Data and Brent Crude Highs

Asian stocks are having a mixed day on Monday 17th January. There is not clear Asia-level trend but there are very diverse country-specific trends that are emerging. The big data points for Monday are the China fourth quarter and full year GDP numbers and the price of Brent Crude, which has been on an upsurge, despite demand concerns due to Omicron.

But first a look at the various Asian markets. Let us look at markets that are positive on Monday. Indian indices are trading higher while the Japanese Nikkei is about 75 bps higher while the Straits Times Singapore is mellowed with gains of just about 15 bps. Among other positive markets, Taiwan is up 66 bps while the Thailand based SET Composite is 66 bps higher. With robust GDP data, the Shanghai Composite is trading 60 bps higher.

Which are the markets in Asia that are trading lower? Hong Kong and Korea are down. In fact, the Hang Seng is lower by 70 bps while the KOSPI is lower by over 110 bps. The Jakarta Composite index of Indonesia is also down nearly 100 bps on Monday. Clearly, the trends are mixed and no clear Asia level trend emerges. But let us look at two important factors that impacted Asia on Monday.

China GDP was a positive surprise. For the fourth quarter ended Dec-21, China reported annualized GDP growth of 4% as against the Reuters consensus estimate of jut 3.6%. Clearly, China has surprise on the upside. For the full year 2021, China’s GDP grew at 8.1% as industrial output largely managed to offset the fall in retail sales.

Interestingly, December IIP for China grew at 4.3%, which his 70 bps more than the Reuters estimates. Also, for the first time since April, the month of December saw auto sector growing by 3.4%. The only disappointment was retail sales growing by 1.7%, which is nearly 200 bps lower than Reuters estimates.

Even as China GDP was encouraging, Brent prices continued to haunt Asia. Brent Prices at $86.46/bbl has scaled to a 3-year high. While the Omicron impact on demand has been limited the supply constraints continue and that is resulting in higher crude prices. Prices have been rising on consistent oil outages and hopes that Omicron will not be so pernicious to growth momentum after all.

Oil put pressure on Asian markets. The worry is that aggressive investment buying in oil is yet to start. Once the aggressive longs start getting built up, the price would be above $100 and that is the concern that Asian markets are broadly pencilling in. After, some of the largest Asian economies like Japan, Korea, China and India continue to be net importers of crude oil.

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