Tencent overhang makes for quiet stock trading day in Asia

Major stock markets across Asia are moving in a tight range and even S&P 500 Index futures, which rose as much as 0.6% earlier, are now struggling for direction.

So what are investors waiting for? The big overhang could be the earnings results of tech behemoth Tencent Holdings, slated to be released after Wednesday’s market close. It does have the biggest weighting on the regional benchmark. And trading volume on the Hang Seng Index is 35% lower than normal, perhaps as investors hold off on making any decisions until profit numbers come in.

Our preview shows that the options market is pricing in the biggest post-results reaction since 2015. The industry accounts for almost a fifth of Asia’s stock index and so far, several Chinese tech companies have reported worse-than-expected results. Add to that the fact that at least 11 brokers tracked by Bloomberg have cut their price targets for Tencent this month. The company has already lost $243 billion in market cap since January.

It’s not like there hasn’t been a lot of news to trade on:

There was the Bloomberg scoop that the Trump administration was said to hold off for now on imposing new tariffs on automobile imports. Japan automakers soared when the headlines hit and pared their gains. Before that, Larry Kudlow said the US and China resumed contact “ at all levels” over trade ahead of a planned meeting between Trump and Xi.

Economic data from China signalled some stabilisation for policy makers grappling with the slowest economic growth in nearly a decade. Japan’s economy contracted in the third quarter for the second time this year. MSCI released the results of its semi-annual review.

Oil showed little sign of recovering from its unprecedented decline. The energy companies in the MSCI Asia Pacific Index were the biggest losers Wednesday, slumping as much as 2.3% (airlines got a nice lift though).

UK Prime Minister Theresa May clinched a Brexit deal with the EU after months of deadlock. December futures contracts on the FTSE 100 Index fell, albeit on light trading during the Asian day.
And yet, the MSCI Asia Pacific Index was little changed at 12:49 p.m. in Hong Kong, while Japan’s Topix index was up just about 0.4%.

Setting aside Tencent and the tech-investment dilemma, Australia is the biggest loser on Wednesday, with a staggering 1.6% slump in its benchmark, taking its two-day loss to largest since February. Crude’s plunge has had a huge impact on the gauge as stocks like Beach Energy and WorleyParsons tumbled.

Wednesday is looking like a big day in the US with the 13-F filings deadline and US inflation data.

Some notable movers:

Tokyo Seimitsu Rises Most Since 2011 on Better Earnings Outlook THK Declines as 3Q Profits Miss Estimates and Orders Tumble Metrobank Jumps as MSCI Weight Increase Seen to Boost Shares Asia Power Producers Jump as Lower Oil Cuts Gas Costs

Stock-market summary

Japan’s Topix index up 0.4%; Nikkei 225 up 0.2% Hong Kong’s Hang Seng Index down 0.1%; Hang Seng China Enterprises down 0.4%; Shanghai Composite little changed Taiwan’s Taiex index up 0.1% South Korea’s Kospi index down 0.3%; Kospi 200 down 0.5% Australia’s S&P/ASX 200 down 1.5%; New Zealand’s S&P/NZX 50 down 0.4% India’s S&P BSE Sensex Index little changed; NSE Nifty 50 little changed Singapore’s Straits Times Index down 0.4%; Malaysia’s KLCI down 0.5%; Philippine Stock Exchange up 0.9%; Jakarta Composite up 1%; Thailand’s SET down 0.3%; Vietnam’s VN Index down 0.2%

� L.P