Investors React Positively to China Services Survey Data, Asia-Pacific Shares Increase

Asian markets rose on Thursday, with investors appearing unfazed by the U.S. Federal Reserve's decision to raise interest rates in order to combat inflation.

Mainland China's stock markets were up on Monday, with the Shenzhen Component rising 2.13% to close at 11,332.01 and the Shanghai Composite up 1.01% to 3,155.22.

Hong Kong's Hang Seng index rose 1.38% in its final hour of trade, after earlier gaining more than 2%. Investors were digesting an improved reading in China's Caixin services Purchasing Managers' Index for December. Hong Kong's S&P Purchasing Managers' Index also showed eased pressure on factory activity.

Australia's S&P/ASX 200 ended slightly higher at 7,063.6. In Japan, the Nikkei 225 rose 0.40% to 25,820.8, while the Topix added 0.04% to close at 1,868.9. South Korea's Kospi rose 0.38% to end at 2,264.65, while the Kosdaq lost 0.55% to close at 679.92.

On Wall Street, stocks rose overnight after the release of minutes from the December Fed meeting showed that interest rates are likely to remain high as long as inflation does. This ended a two-day losing streak for stocks.

Singapore's retail sales growth slowed in November, according to the latest figures from the Department of Statistics. Sales rose 6.2% from a year ago, compared to the 10.3% growth posted in October.

This reading represents a slowdown from the past seven months of double-digit annualized growth.

Retail sales in Singapore totaled $4 billion in 2019, with 14.8% of sales coming from online channels. This excludes sales of motor vehicles.

According to the report, the higher online retail sales proportion was mainly due to more sales during the year-end online shopping events.

Oil prices rose more than 1% after two days of declines, as China’s reopening added optimism for an economic rebound and support in demand.

Brent crude futures rose 1.08% to $78.68 a barrel on Wednesday, while U.S. West Texas Intermediate futures gained 1.19% to $73.71 a barrel.

The rise in crude prices came as data showed that U.S. crude inventories fell by 5.3 million barrels last week, more than double the expected drop.

Investors appear to have brushed off concerns of a potential global recession, despite shaky economic growth prospects in the US and China. This has led to a more than 9% slump in oil prices over the past two days.

Bank of America has issued a report recommending that investors buy shares in a global fertilizer maker, citing a worldwide shortage of the product. The bank sees 50% upside potential in the stock.

According to the Wall Street bank, the company has a 55% profit margin, which protects it from rising natural gas prices.

The Caixin China General Services Purchasing Manager's Index showed easing pressure on the sector for the month of December, with a reading of 48. This keeps the sector in contraction territory.

The print rose from seeing a six-month low in the previous month, with a reading of 46.7. This is a positive sign for the future of the print industry.

The 50-point mark is the dividing line between growth and contraction. PMI readings are sequential, meaning they show month-on-month expansion or contraction.

"We're seeing a significant improvement in optimism," said Wang Zhe, senior economist at Caixin Insight Group. He added that the gauge for expectations for future activity rose nearly 4 points compared to a month ago.

"Service providers are confident that the economy will recover after Covid containment measures are eased," said Wang.

The technology sector took a hit in 2022.

Jason Ware, an investment professional, is not worried by the recent market volatility. He continues to be optimistic about the tech sector, and has identified four stocks that he likes.

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Hong Kong's S&P Purchasing Managers' Index rose to 49.6 in December from 48.7 in November, remaining in contraction territory for the fourth consecutive month.

S&P Global Ratings said that the slower contraction seen in the city’s private sector was due to a pickup in business activity in the final month of 2022, buoyed by easing of Covid restrictions.

S&P said that demand in the city remains subdued, adding that overall new orders are shrinking due to deteriorating economic conditions.

Citi is not optimistic about lithium prices in the short term. Lithium is a key ingredient in electric vehicle batteries, and demand for EVs is expected to increase in the coming years. However, Citi believes that lithium prices will remain under pressure in the near term due to oversupply in the market.

The bank is still optimistic about its long-term prospects, and has identified three stocks to keep an eye on.

The Federal Reserve released the minutes from its December 13-14 meeting, which showed that central bank officials expect interest rates to remain higher for the foreseeable future. This is in line with the Fed's previous statements on the matter.

The meeting summary stated that participants generally observed that a restrictive policy stance would need to be maintained until the incoming data provided confidence that inflation was on a sustained downward path to 2 percent. It was noted that this was likely to take some time, given the current level of inflation. Several participants commented that historical experience cautioned against prematurely loosening monetary policy.

«A number of participants emphasized that it would be important to clearly communicate that a slowing in the pace of rate increases was not an indication of any weakening of the Committee’s resolve to achieve its price-stability goal or a judgment that inflation was already on a persistent downward path,” the minutes said. In other words, even though the Fed might be slowing down the rate of interest rate increases, this doesn't mean that it's giving up on its goal of achieving price stability.

The latest Job Openings and Labor Turnover Survey (JOLTS) showed that there were 10.5 million job openings in November. This is a good sign for the economy, as it indicates that businesses are hiring and looking for workers.

The November JOLTS report came in slightly better than expected, with 10 million job openings. This was little changed from the previous month, and in line with analysts' expectations.

There were 6.1 million hires and 5.9 million separations in October, little changed from the previous month. There were also 4.2 million quits and 1.4 million layoffs and discharges during the month.

Chinese ADRs rose in premarket trading after Ant Group received approval to increase its registered capital, a sign that Chinese regulators may be easing their grip on the country's tech sector.

JD.com and Alibaba shares both rose by over 6%. Other stocks that made significant gains included NetEase, Baidu and Trip.com.

Ant Group, which had its own IPO plans scuttled by regulatory concerns, was allowed to double its registered capital as part of the new plan. This will give the company more leeway to grow and expand its operations.