Nikkei, Hang Seng Edge Down as India Markets Stage Recovery

Asian markets made mixed moves on Wednesday as worries about a cooling US economy kept risk appetite in check but soft US labour market data firmed up bets of a September rate cut by the Federal Reserve.

Focus in the region was on how Indian markets performed after stocks sank and the rupee slid a day before following voting results that showed a slimmer-than-expected victory margin for Prime Minister Narendra Modi.

In a broad-based recovery, Indian benchmarks closed with gains of more than 3% after two key allies pledged their support to form a new government with Modi.

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The NSE Nifty 50 index closed up 3.36% at 22,620.35 points, and the S&P BSE Sensex was up 3.2% at 74,382.24. The indexes fell 0.42% and 0.26% earlier in the session.

Modi is expected to be sworn-in for a record-equalling third term on Saturday (June 8).

“The support pledged by the allies has given confidence to the market as there were uncertainties around this,” Deepak Jasani, head of retail research at HDFC Securities, said.

The benchmark indexes closed nearly 6% lower on Tuesday after a humbling election verdict that saw the Modi-led Bharatiya Janata Party lose its majority in parliament.

Foreign institutional investors (FIIs) sold a record 124.36 billion rupees (about $1.5 billion) worth of Indian shares on Tuesday, provisional data from the National Stock Exchange showed.

Some analysts said the fall in Indian equities could present an opportunity to buy stocks.

“Broad policy continuity, macroeconomic resilience and strong growth fundamentals should keep relative appeal for Indian equities intact,” Goldman Sachs said in a note.

“We also expect foreign flows to return, given this event risk is behind us now, especially in the light of weak flows so far this year and multi-year low foreign positioning,” Goldman said.

Stronger yen weighs on Nikkei

Meanwhile, Japan’s Nikkei share average ended lower as economic-sensitive stocks fell on weaker-than-expected US labour market data and the yen’s rebound hurt sentiment.

The Nikkei fell 0.89% to close at 38,490.17.

“Wall Street rose overnight after the labour market data helped US Treasury yields to fall,” Shoichi Arisawa, general manager of the investment research department at IwaiCosmo Securities, said.

“But the yen rose, which was negative for Japanese equities. The positive impact of falling Japanese government bond yields was limited in the current session.”

Japanese government bond (JGB) yields tracked declines in US Treasury yields, with the 10-year bond yield falling below 1% for the first time since May 24.

The yen rose to a three-week peak against the dollar overnight before retracing some of the overnight gains, driven by investors unwinding bets in emerging markets in Asia trade.

Shipping companies lost 2.86% and energy explorers fell 2.95%. Steel companies lost also lost 2.05%. The insurance sector fell 3.73%, the most among the Tokyo Stock Exchange’s 33 industry sub-indexes.

SoftBank Group jumped 4.64% after the Financial Times reported Elliott Management has rebuilt a stake worth over $2 billion in the technology investor.

The broader Topix lost 1.41% to 2,748.22, with Toyota Motor slipping 2.43% to become the biggest drag on the Topix.

China, HK edge down

Meanwhile, China stocks edged down, dragged lower by consumer and property shares, despite an unexpected pickup in service activity in May.

The Shanghai Composite index closed down 0.36% at 3,079.92 points, China’s blue-chip CSI300 index was down 0.22%.

China’s services activity in May accelerated at the quickest pace in 10 months while staffing levels expanded for the first time since January, pointing to sustained recovery in the second quarter.

In Hong Kong, the Hang Seng Index was up 0.33% at 18,505.56.

Around the region, Taipei, Bangkok, Manila and Seoul were in the green, while Singapore and Jakarta closed down. MSCI’s Asia ex-Japan stock index was firmer by 1.11%.

Key figures:

Tokyo – Nikkei 225 < DOWN 0.89% at 38,490.17 (close)

Hong Kong – Hang Seng Index < DOWN 0.1% at 18,424.96 (close)

Shanghai – Composite < DOWN 0.83% at 3,065.40 (close)

London – FTSE 100 > UP 0.47% at 8,271.04 (1317 GMT)

New York – Dow > UP 0.36% at 38,711.29 (Tuesday close)

• Reuters, with additional editing by Vishakha Saxena

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Vishakha Saxena

Vishakha Saxena is the Multimedia and Social Media Editor at Asia Financial. She has worked as a digital journalist since 2013, and is an experienced writer and multimedia producer. As a trader and investor, she is keenly interested in new economy, emerging markets and the intersections of finance and society. You can write to her at [email protected]