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Nikkei Markets

Asian stocks little changed as China manufacturing contracts for second month

Chinese lenders, Vedanta among major losers

HONG KONG (Nikkei Markets) -- Asian shares ended little changed on Friday after a private survey revealed that China's manufacturing activity lost more momentum last month.

The Nikkei Asia300 Index edged 0.1% higher to close at 1,291.48. For the week, however, the index added 1.3%, helped the U.S. Federal Reserve's comments that it will be patient on future rate increases amid low inflation and global economic developments.

On Friday, data revealed that China's manufacturing activity contracted for the second straight month. The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) declined to 48.3 in January from 49.7 in the previous month. The January reading was the worst in three years, Reuters reported, and was below 49.5 expected by economists. The Caixin PMI came after the official PMI data, released on Thursday, also signaled that factory activity declined last month. The official PMI came in at 49.5 for January. A reading below 50 indicates a contraction in activity.

"The terrible decline in the Caixin PMI Index shows just how important it is for China and the U.S. to secure a trade deal. If nothing else, a deal should prevent the near-term imposition of higher tariffs," ING Bank said in a note.

A high-level Chinese delegation, led by Chinese Vice Premier Liu He, on Thursday concluded two-day talks with their U.S. counterparts in an effort to end tariffs on billions of dollars of Chinese imports.

Following the talks, Liu told U.S. President Donald Trump that Chinese President Xi Jinping believes the two countries should reach a mutually beneficial agreement on trade, Reuters reported, citing China's official news agency Xinhua. Trump reportedly informed Liu that a U.S. trade delegation will visit China in mid-February for a new round of talks.

Trump, on Twitter, said that he, along with Chinese officials, were trying "to do a complete deal, leaving nothing unresolved on the table," and "all of the many problems" will hopefully be resolved.

On the back of the disappointing manufacturing data, the onshore yuan dropped 0.5% to 6.73 to the dollar. Majority of other regional currencies were lower ahead of the closely-watched U.S. jobs data due later Friday. The dollar index was little changed and the U.S. 10-year yield slipped to 2.63%.

There was more negative economic news for Asian equities on Friday. Manufacturing January PMI's of Japan, Taiwan, Indonesia, the Philippines, South Korea, and Thailand were all down on a month-on-month basis.

On Friday, the Indian government presented the budget for the financial year beginning Apr. 1. The country's fiscal deficit target for the current financial year was revised higher by 10 basis points to 3.4% and the target for the next year was revised higher to 3.4% from 3.1% previously estimated. The budget also proposed a full tax rebate on an individual's annual earnings of up to 500,000 rupees ($7,043)

Among movers on Friday, Chinese lenders ended mostly lower, paced by Industrial & Commercial Bank of China (ICBC), which slipped 0.7%.

Vedanta tumbled 17.8% to 162.30 rupees after the Indian miner said its subsidiary, Cairn India, will buy an economic interest via a structured investment in Anglo American from promoter holding company, Volcan Investments. CLSA said in a note that the use of Vedanta's cash to fund investments for promoter holding company raises concerns of related party transactions and potential use of cash in the future. It downgraded the shares to 'sell' and cut the target price to 170 rupees. Late Thursday, Vedanta reported that December quarter net profit fell by 21%.

Hyundai Heavy Industries tumbled 7.6% after it said late Thursday that it had reached a deal to acquire a controlling stake in rival Daewoo Shipbuilding & Marine Engineering from Korea Development Bank.

Hong Kong-listed casino operator Galaxy Entertainment Group advanced 2% after Macau said gross gaming revenues fell by 5% in January, less than the 7% expected by analysts at Nomura.

Singapore Post fell 2% after reporting a 15.6% rise in the October-December earnings and a 7.6% increase in revenues.

Maruti Suzuki India added 5% after the carmaker said total sales in January rose 0.2%.

Hero MotoCorp rose 7.5% after the Indian two-wheeler maker reported a 4.4% decline in net profit for the December quarter as expected. Bharti Airtel advanced 1.4% after the telecom operator's December quarter consolidated revenue and net income before-exceptional items met expectations.

--Nimesh Vora

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