Asia stocks rally as China’s stimulus lifts mood: markets wrap
Stocks in Asia pushed higher after President Xi Jinping stepped up support for China’s economy, buoying optimism.
Mainland China shares advanced while the Hang Seng Tech Index jumped 5%, the most since the end of August, on the government’s support plans that include issuing additional sovereign debt and raising the budget deficit ratio. A gauge of Asian equity benchmarks headed for the highest close in a week as Japanese and Korean stocks related to China consumer and manufacturing demand also rose.
China has rarely adjusted its budget mid-year, having previously done so in periods including 2008, in the aftermath of the Sichuan earthquake and in the wake of the Asian financial crisis in the late 1990s.
“Given the funds will continue to be used next year, this means at least in the first half of next year, pro-growth policies will continue to take effect,” Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, wrote in a note “We estimate next year’s macroeconomy will grow at a medium- to high-speed of 5%.”
Meanwhile, Hong Kong property stocks jumped after Sing Tao reported that Hong Kong CEO John Lee will announce cutting home purchase tax to 7.5% from 15% for residents buying a second home.
Benchmark indexes also traded higher in Japan, where shares of semiconductor-equipment company Kokusai Electric Corp opened 15% above initial public offering price. Contracts for US equities slipped after the S&P 500 halted a five-day slide on Tuesday and followed mixed earnings that saw Microsoft climb and Alphabet drop in late US trading.
In foreign exchange, the Thai baht advanced for a second day on the back of China’s plans, while aluminum, copper and iron ore all rose.
Elsewhere, the Australian dollar extended its gain on higher-than-expected inflation data. Expectations the Reserve Bank of Australia will hike on 7 November pushed up the currency and sent the three-year government bond yield as high as 4.28%, a level last seen in 2011.
Rates on two-year Treasury were down five basis points and the dollar was weaker against all of its G10 peers.
Bank of Japan officials are likely to monitor bond yield movements until the last minute before making a decision on whether to adjust the yield curve control program at a policy meeting next week, according to people familiar with the matter. The yen was little changed on Wednesday.
Investors looking to the US earnings season for a dose of good news are hanging their hopes on Big Tech. The five largest companies in the S&P 500 account for about a quarter of the benchmark’s market capitalization. Their earnings were projected to jump 34% from a year earlier on average, according to analyst estimates compiled by Bloomberg Intelligence.
US business activity picked up in October after back-to-back months of stagnation, helped by a rebound in factory demand and an easing in service-sector inflation.
Meanwhile, oil steadied on signs the Israel-Hamas war will remain contained for the time being. Gold edged high.