Asian stocks rise, China in the lead on new stimulus plans
Most Asian stocks rose on Wednesday, tracking a positive overnight session on Wall Street, while Chinese stocks extended a recovery rally after the government announced plans for a massive bond issuance.
A decline in Treasury yields benefited local technology stocks, as did positive overnight earnings from Microsoft Corp (NASDAQ: MSFT). Japan’s Nikkei 225 index jumped over 1%, buoyed chiefly by strength in tech and industrial stocks, while the broader TOPIX added 1%.
But while broader Asian stocks advanced, they were still nursing steep losses for October, as risk sentiment remained frail after the onset of the Israel-Hamas war. Markets were also on edge over rising U.S. interest rates before a Federal Reserve meeting next week.
Chinese stocks rebound on bond issuance news
Hong Kong and Chinese markets were by far the best performers for the day, with the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes up 0.8% each, while the Hang Seng surged 2.5%
All three indexes rebounded from their weakest levels for the year, after Beijing announced plans to issue 1 trillion yuan ($1= 7.3088 yuan) in government bonds to support the economy.
A bulk of the issuance will be directed towards infrastructure spending, particularly rebuilding disaster-hit areas and bolstering relief capabilities. Construction and utility stocks were the best performers on Chinese indexes, following news of the issuance. Chinese stocks were also buoyed by a sovereign fund, Central Huijin, saying that it was buying local exchange-traded funds.
Still, Chinese stocks remained close to 2023 lows, having logged steep losses on concerns over an
economic slowdown and a property market meltdown. Despite Wednesday’s optimism, the factors that had dented domestic markets still remained in play.
Chinese markets are among the worst performers in Asia this year.
Elsewhere in Asia, South Korea’s KOSPI fell 0.2% as data showed local consumer confidence worsened in October.
Australia’s ASX 200 was flat, as optimism over China was largely offset by data showing that consumer price index inflation grew more than expected in the third quarter, setting up the case for an interest rate hike by the Reserve Bank of Australia next week.
Futures for India’s Nifty 50 index pointed to a weaker open, as traders continued to lock-in profits after a strong run of gains this year. The Nifty was trading down nearly 2% so far in October, after clocking record highs in the prior month.
More Fed cues in focus as meeting looms
Markets remained on edge over any more signals on monetary policy from the Federal Reserve, which is set to decide on interest rates next week. Data released overnight showed that U.S. business activity improved in October, giving the Fed more headroom to keep rates higher.
Fed Chair Jerome Powell is set to speak at the Moynihan Lecture in Social Science and Public Policy in Washington, D.C., later in the day. Powell had last week reiterated the prospect of at least one more rate hike this year, and that rates will remain higher for longer.
Higher rates bode poorly for most Asian markets, given that they diminish the appeal of risk-driven assets and dent capital flows into the region.