Asia Markets: Asian markets feel the squeeze amid continued light trading

Asian stocks were mildly higher Thursday as investors sought trading cues, even as Japan’s Nikkei Stock Average was pressured lower by the yen’s strength overnight.

“We sort of need a trigger,” said Christoffer Moltke-Leth, director of global sales trading at Saxo Capital Markets. “I think [the market] will be driven very much by individual company news….It will be a stock picker’s market.”

Korea’s Kospi SEU, +0.20%   was trading up 0.3%, the Shanghai Composite Index SHCOMP, +0.38%   was 0.4% higher and Australia’s S&P/ASX 200 XJO, +0.23%   was trading around flat, while Japan’s Nikkei Stock Average NIK, -0.37%   was down 0.2%.

Trading volumes this year have been relatively low despite the push higher last month on hopes that U.S. President Donald Trump would implement policies to stimulate the economy. For the year to date, Hang Seng Index volumes are down 21% from their two-year average, while S&P/ASX 200 volumes are off 16%, according to Thomson Reuters. Nikkei volumes are down 6% in the year to date from their one-year average.

“The big picture is we’ve arrived at an equilibrium point,” said Ric Spooner, chief market analyst at CMC Markets. “I think the market will be reluctant [to go] into higher ground because we are already fairly high,” added Spooner. “People are concentrating switching stocks in [their] portfolio for value.”

That said, Hong Kong’s H-share market (Hong Kong-traded stocks of firms incorporated in China) have had a bullish start to the year. The H-share tracking Hang Seng China Enterprises Index is up 1.6% Thursday, and is up 7.6% in the year to date.

The MSCI China Index, which tracks offshore listed China equities, is up 8.8% in the year to date–making it the best performing country among those in the MSCI Asia ex-Japan index.

Hong Kong’s Hang Seng Index HSI, +0.29%   was trading up 0.5%, buoyed by gains of Tencent Holdings Ltd. 0700, +0.49%   and some financial stocks including China Construction Bank 0939, +1.03%   .

In Japan, overnight yen strength hit export-focused shares, with auto stocks in particular leading the broader market down. The Topix subindex for transportation equipment was off 1.6%. Honda Motor 7267, -1.99%   was down 1.7% and Subaru-brand car maker Fuji Heavy Industries 7270, -3.67%   was 3.6% lower. Auto brake materials maker Nisshinbo 3105, -4.23%   was down 3.9% following news that it has decided to pull back plans for a Mexico plant.

Japan Prime Minister Shinzo Abe is meeting Trump in Washington, D.C. on Friday and the summit is being watched very closely, especially after Trump unnerved Tokyo officials with accusation that Japan had unfairly influenced financial markets and the yen to help its exporters beat U.S. companies. Analysts say Japanese officials don’t want the yen to weaken ahead of that meeting; the yen has strengthened slightly against the dollar since the Tokyo share market closed on Wednesday was trading at ¥112.09.

The New Zealand dollar weakened by over 0.7% against its U.S. counterpart to NZ$ 0.7240 after the Reserve Bank of New Zealand policy meeting saw its cash rate target maintained at 1.75% as widely expected and the bank reiterated that “a decline in the exchange rate is needed”.

However, the February Monetary Policy Statement was more cautious than the November statement, which undermined New Zealand dollar. The RBNZ highlighted that “monetary policy will remain accommodative for a considerable period.” In November, the RBNZ wasn’t as specific on the timing, instead stating “monetary policy will continue to be accommodative.”

Looking ahead, investors could take cues from Chinese trade data due Friday. China’s January exports in dollar terms are expected to rise 3.1% compared with a year ago, while imports are expected to rise 10% for a trade surplus of $ 50 billion.

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