By Ese Erheriene
The pullback in Chinese equities helped pare some early gains in Asia on Monday, but end-of-the-week gains in U.S. technology stocks supported broad gains elsewhere in the region.
Equity benchmarks in mainland China remained solidly lower in afternoon trading, though the losses narrowed somewhat, as concerns about the Chinese bond market and a greater-than-expected number of initial public offering approvals over the weekend saw investors cutting down their holdings.
“Investors appear to be spooked by the bond selloff this morning in the Chinese market,” said Jingyi Pan, a market strategist at IG Group . “With China’s 19th party congress now over and the focus back on the authorities’ deleveraging intent, the equities market appears to be bearing the brunt of the move in yields.”
The Shanghai Composite Index /zigman2/quotes/210598127/delayed CN:SHCOMP -0.21% closed down 0.8%, after falling as much as 1.7%, while the main Shenzhen index /zigman2/quotes/210598015/delayed CN:399106 +0.06% was down 1.7%. After opening higher, Hong Kong stocks bobbed between gains and losses as mainland stocks fell. The Hang Seng /zigman2/quotes/210598030/delayed HK:HSI -0.11% fell 0.3%.
Besides bonds, traders also blamed an unexpected jump in IPO approvals over the weekend. Regulators approved 9.5 billion yuan ($1.43 billion) of deals, double recent levels.
Haitong Securities said that while it considers an upward trend to remain intact for the medium term, it sees the recent drop in Chinese bonds as a warning sign of a stock pullback. It also flagged potential further regulatory tightening and a weaker yuan as possible risks.
Still, the China declines were likely to be short-lived, some analysts said.
“When growth is OK equities tend to do OK, so I would say this is just a temporary setback,” said Hao Hong, managing director and head of research at BOCOM International.
Meanwhile, after opening higher, the Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK +0.25% reversed midmorning losses and ended just in positive territory, up 0.01%. Selling pressure crept in after the benchmark index logged seven straight weeks of gains. The yen, which firmed against the dollar throughout the session, contributed to the lackluster trading. The Japanese currency /zigman2/quotes/210561789/realtime/sampled USDJPY +0.0725% was last up 0.1% versus the greenback..
Elsewhere, solid earnings from tech giants Amazon /zigman2/quotes/210331248/composite AMZN +0.24% and Alphabet /zigman2/quotes/202490156/composite GOOGL -0.21% , among others, supported record closes in the Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.78% and the S&P 500 /zigman2/quotes/210599714/realtime SPX +1.36% on Friday. Asia markets that are tech-heavy outperformed, with Taiwan’s Taiex rising strongly in early trade then ending narrowly higher. Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 +0.33% was up 0.2%.
Among other tech names, Sharp /zigman2/quotes/203224600/delayed JP:6753 +0.50% traded up 1% in Tokyo and Samsung Electronics /zigman2/quotes/209800866/delayed KR:005930 +0.92% rose 1.5% in Seoul. In Taiwan, Apple suppliers Hon Hai Precision /zigman2/quotes/207256514/delayed TW:2317 +0.26% , also known as Foxconn, gained 1.8% while Largan Precision /zigman2/quotes/210444196/delayed TW:3008 -0.23% surged 4.2%.
In other indexes, Australia’s S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO +0.96% closed up 0.3%, while Singapore’s Straits Times Index /zigman2/quotes/210597985/delayed SG:STI -0.06% was last off 0.3%. New Zealand’s benchmark /zigman2/quotes/211587880/delayed NZ:NZ50GR +0.92% added 0.7% to hit a fresh record closing high, after falling for the prior three sessions.
In commodities, oil prices held on to gains following Friday’s 2% advance, following comments from Saudi Arabia’s crown prince suggesting the production-cut agreement by members of the Organization of the Petroleum Exporting Countries should be extended.
More broadly, investor focus this week will likely remain on third-quarter earnings results, as well as major central bank news, and key data from the U.S. and China, noted OCBC Bank . U.S. President Donald Trump was also poised to name a new head of the Federal Reserve this week to replace Janet Yellen.