South Korea leads weekly gains; Asia markets fall after Powell comments

China’s largest chipmaker SMIC on Thursday posted a 80% drop in third-quarter profit as global demand weakness hit foundries hard.

Hong Kong-listed shares of SMIC slid 5.98% by midday trading.

Net income for the quarter plunged 80% compared to a year ago — larger than the 64% drop posted in second quarter 2019, according to company figures.

SMIC or Semiconductor Manufacturing International Co., posted revenue of $1.62 billion in the third quarter of the year, down 15% year-on-year. Net income for that period was $93.98 million, far below analysts’ expectations of $165.1 million.

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— Sheila Chiang, Shreyashi Sanyal

Shares of Japan’s SoftBank Group plunged 7.39% in early trading, hitting their lowest level since early June.

SoftBank booked another loss during the second quarter of 931.1 billion yen ($6.2 billion) versus LSEG estimates of a loss of 114.1 billion yen.

Quarterly net sales were 1.67 trillion Japanese yen versus expectations of 1.6 trillion yen.

SoftBank’s losses were driven by the investment and financial support it provided to co-working space firm WeWork, which filed for Chapter 11 bankruptcy protection in the U.S. this week. 

The company said that its Vision Fund booked an investment gain of 21.3 billion yen, its second straight quarter of gains. It was driven by a gain arising from the sale of shares in chipmaker Arm to a subsidiary of SoftBank.

Japan’s blue-chip Nikkei 225 fell 1.09% in the first hour of trading.

New Zealand’s manufacturing sector contracted in October for the eighth straight month, according to a survey.

The Bank of New Zealand-BusinessNZ Performance of Manufacturing Index (PMI) fell to 42.5 in October from 45.1 in September. The reading was much lower than the long-term average activity rate of 52.8.

It was also the biggest contraction since August 2021.

A figure above 50 shows manufacturing activity is expanding, while anything below points to contraction.

BNZ senior economist Doug Steel said “today’s PMI is not a good look for GDP and employment growth.”

“There’s a chance that the decline is bigger than we think, if the PMI does not bounce in the final months of the year.”

New orders fell to 44.1 from 44.8 in the prior month.

— Shreyashi Sanyal

Rising rates and the possibility of a recession on the horizon have created a “mixed picture” for equity markets, according to one strategist — but several companies can look forward to markedly stronger earnings growth in the next year.

“When you look at what companies are saying about next year, they’re not really being overly cautious or overly bullish … So, you get a sense that into next year, earnings will be robust in terms of steady year-on-year [growth],” Rahul Ghosh, portfolio specialist, equity division at T. Rowe Price, told “Street Signs Asia” on Thursday.

“But, if you’re looking for significant earnings expansion, I suspect, at a market level, that’s probably less likely. You really have to dig into individual companies and sectors.”

Ghosh is looking favorably at three sectors — and named some of his favorite stocks.

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— Amala Balakrishner

Oil settled slightly higher on Thursday but still hovered at three-months lows after a sell-off this week triggered by worries that demand is softening.

Brent crude contracts for January edged up 47 cents, or .59%, to $80.01 per barrel, while West Texas Intermediate contracts for December ticked up 41 cents, or .54%, to $75.74 a barrel.

Oil markets sold off this week on declining Chinese exports and forecasts that the U.S. will consume less crude this year, while fears of a broader Middle East war have abated.

— Spencer Kimball

Fed Chair Jerome Powell said in a speech Thursday that the central bank thinks more may be needed to bring down inflation.

“The Federal Open Market Committee is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2 percent over time; we are not confident that we have achieved such a stance,” he said in his prepared speech.

Stocks moved to their lows of the day following Powell’s remarks.

— Jeff Cox, Fred Imbert

The 10-year U.S. Treasury yield jumped 11 basis points to 4.622% after the 30-year bond auction saw weak demand. The 2-year Treasury yield added roughly 4 basis points to 4.98%.

Yields and prices move in opposite directions. One basis point equals 0.01%.

Federal Reserve Governor Michelle Bowman said Thursday she still expects interest rates to rise but supported the decision earlier this month to hold.

“There is an unusually high level of uncertainty regarding the economy and my own economic outlook, especially considering recent surprises in the data, data revisions, and ongoing geopolitical risks,” Bowman said in prepared remarks for a speech to bankers in Florida. “Currently, the federal funds rate appears to be restrictive, and financial conditions have tightened since September,” she added.

Separately, Richmond Fed President Thomas Barkin said he expects “some sort of a slowdown” in the economy ahead but sees inflation as still too high. After 11 rate hikes totaling 5.25 percentage points, Fed officials are in a place where they can observe how policy impacts the economy and decide from there, he said.

“Whether a slowdown that settles inflation requires more from us remains to be seen, which is why I supported our decision to hold rates at our last meeting. With rates restrictive and financial conditions tightened, we have time to reconcile competing narratives on demand and to test different views on the trajectory of inflation,” Barkin said.

As a governor, Bowman is a voting member of the rate-setting Federal Open Market Committee. Barkin does not vote this year but will in 2024.

—Jeff Cox