The Exchange Square in Central area of Hong Kong. (Photo: Chan Long Hei/Bloomberg) Hong Kong equities gained and those in mainland China fluctuated following the release of details for a People’s Bank of China liquidity tool institutional investors can use to purchase stocks, a measure initially unveiled last month. That extended volatile trading after a benchmark of mainland stocks on Wednesday suffered its biggest loss in four years.
Treasuries were steady in Asian trading, while the Bloomberg Dollar Spot Index and the yen were little changed. South Korean bond futures rose following news of inclusion in FTSE Russell’s World Government Bond Index.
Chinese stocks are set for further gyrations as investors look to a press conference by the finance ministry on Saturday for clues on stimulus. A 10-day equities rally on the mainland snapped Wednesday after weak economic data from the Golden Week holidays and Beijing’s reluctance to commit to more measures to fuel the rally.
“Leading into that meeting there is definitely a lot of optimism and hope” around fiscal clarity, said Yuting Shao, macro strategist for State Street Global Markets, on Bloomberg Television. The broader themes of lower US borrowing costs and official support for China’s economy will act as tailwinds for risk sentiment, she added. “Any clarity from China is going to add another layer on top.”
The bar is high for China’s Ministry of Finance to convince the market that its reflation pivot is back on more firmly at the press conference on Saturday, according to Morgan Stanley.
Louisa Fok, a China equity strategist at Bank of Singapore, said 2 trillion yuan ($283-billion) of stimulus is “now becoming the consensus,” with probably half of that going to local governments. If a majority of the remainder goes to consumption, it will be positive for markets, she said.
Elsewhere in Asia, Taiwan Semiconductor Manufacturing Co. posted a better-than-expected 39% rise in quarterly revenue on Wednesday. Markets are closed in Taiwan on Thursday.
In commodities, oil edged higher as US crude inventories swelled and traders monitored China’s plans for fiscal policy. Gold rose for the first time in seven days.
US consumer price data to be released later on Thursday is expected to show inflation further moderating, supporting the Fed’s anticipated easing in the coming months. Despite this, market pricing indicates the likelihood of another 50 basis point rate cut is all but off the table following last week’s strong jobs report.
“Policymakers agree inflation is fading and they see potential weakness in job growth,” said David Russell at TradeStation. “That keeps rate cuts on the table if needed. The bottom line is that Powell might have the market’s back headed into the year end.”