(Bloomberg) — Most Asian stocks rose, led by a rally in China and Hong Kong, as investors bet that the latest stimulus measures from Beijing provide a floor for the country’s cratering stock market.
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Shares in Hong Kong and mainland China rallied, adding to Wednesday’s sharp gains, after the People’s Bank of China surprised investors with plans to cut the reserve requirement ratio for banks next month and hinted at more. Stocks in South Korea and Japan declined. SK Hynix Inc., the world’s no. 2 maker of memory chips, dropped as investors assessed its fourth-quarter results and the outlook on the chip sector. US equity futures were little changed.
PBOC Governor Pan Gongsheng said Wednesday the RRR will be cut by 0.5 percentage points on Feb. 5 to inject 1 trillion yuan ($140 billion) in long-term liquidity. The regulators followed up the PBOC announcement by adding more measures to bolster the slumping property and stocks.
“Given where valuations are, an allocation to China could be an opportunistic trade right now,” Alice Shen, portfolio manager at VanEck Australia Pt, wrote in a note. “Should the forthcoming policies be successful in addressing these issues, we may look back upon the start of 2024 as the optimal time to buy.”
Still, doubts persist if the latest monetary stimulus will prove to be the panacea investors have been hopping for after a turbulent start to the new year. Since 2020, cuts to the RRR have not boosted China stocks, with CSI 300 benchmark losing nearly 4% three months after such a reduction.
“Given that earlier two cuts last year have failed to provide much turnaround in economic conditions, the eventual effectiveness of the latest cut is still brought into question,” said Jun Rong Yeap, market strategist at IG Asia. Yeap said he still sees the PBOC’s latest move to drive “some temporary unwinding in the extreme bearish sentiments for Chinese equities”.
Meanwhile, the dollar strengthened against all of its major Group of 10 peers and treasury yields steadied in Asia trading after 30-year yields climbed to the highest level so far this year in Wednesday’s session following a poor auction.
In Japan, yield on the benchmark 10-year government bond climbed after a sharp jump Wednesday as investors bet that the Bank of Japan remains on track to end its negative interest rate policy later in the year.
Later Thursday, focus will shift to the European Central Bank. While policy makers are expected to keep rates on hold this week, attention will be on clues for the path forward. Euro-area data Wednesday showing private-sector activity contracted again in January points to the ECB holding off from rate cuts till June, according to Bloomberg Intelligence.
In the US, investors will parse a slew of US economic data — including gross domestic product — due Thursday, as they mull when the Federal Reserve will cut interest rates.
“Frankly, everything depends on the incoming data now and there are a lot of potentially significant releases over the next few weeks that could swing the odds of a March rate cut in either direction,” Paul Ashworth, chief North America economist at Capital Economics, wrote. “We still think the Fed will lower rates by 25 basis points at that upcoming meeting.”
Elsewhere, oil advanced to trade near a one-month high after US crude inventories dropped by far more than expected.
Key events this week:
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Eurozone ECB rate decision, Thursday
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Germany IFO business climate, Thursday
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US GDP, initial jobless claims, durable goods, wholesale inventories, new home sales, Thursday
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Japan Tokyo CPI, Friday
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US personal income & spending, Friday
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Bank of Japan issues minutes of policy meeting, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures were little changed as of 12:36 p.m. Tokyo time
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Nasdaq 100 futures were little changed
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Japan’s Topix was little changed
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Australia’s S&P/ASX 200 rose 0.5%
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Hong Kong’s Hang Seng rose 1.5%
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The Shanghai Composite rose 2.1%
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Euro Stoxx 50 futures fell 0.1%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0878
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The Japanese yen fell 0.1% to 147.68 per dollar
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The offshore yuan was little changed at 7.1642 per dollar
Cryptocurrencies
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Bitcoin rose 0.7% to $40,039.2
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Ether was little changed at $2,217.26
Bonds
Commodities
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West Texas Intermediate crude rose 0.4% to $75.40 a barrel
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Spot gold rose 0.1% to $2,016.39 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Stephen Kirkland and Ruth Carson.
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