Hong Kong led a rally across most Asian markets Tuesday as traders were cheered by reports that Chinese authorities were considering a blockbuster boost to equities after a painful start to the year.
The surge came after another record day on Wall Street where optimism about the outlook for the US economy has taken the place of expectations for a string of interest rate cuts starting in March.
The Hang Seng Index in Hong Kong piled on more than three percent in the morning session and Shanghai also pushed higher after it emerged that Premier Li Qiang had called for more “forceful” measures to support China’s battered stocks, giving a shot in the arm to investor confidence.
Hong Kong has lost around 10 percent since the turn of the year and Shanghai more than seven percent on worries that officials were not doing enough to help the economy, which grew last year at its slowest pace since 1990, outside the pandemic years.
Authorities are looking at a raft of initiatives, Bloomberg reported, adding that policymakers were seeking to mobilise nearly $280 billion, mainly from the offshore accounts of state-owned enterprises.
“It sounds like something had been readied in response to the recent equity rout,” Neo Wang, at Evercore ISI, said.
“The market was poor enough to warrant such elevated attention — China cannot afford to see A-shares sinking toward the Lunar New Year holidays.”
Saxo Markets’ Redmond Wong added that investors were hoping for more measures at key upcoming meetings.
“Prevailing pessimism regarding the economy, policy efficacy, and reduced allocation to China by global and Asian equity funds persists,” he said in a commentary.
“Bargain hunters remain on the sidelines, and technical rebounds might face selling pressure until more information emerges from the Third Plenum potentially in February and the Two-session meetings in March, shedding light on the trajectory of the Chinese economy.”
Wall St records –
Most of Asia’s other markets also rose, with Sydney, Seoul, Wellington, Taipei and Manila in the green.
But Tokyo edged down on profit-taking after a surge in recent weeks pushed the Nikkei to three-decade highs. The Bank of Japan held off tightening monetary policy, as expected, and gave no clues about a timetable for a hawkish pivot from its ultra-loose position.
Singapore and Jakarta also dipped.
Mumbai edged lower a day after overtaking Hong Kong as the world’s fourth-biggest stock market fuelled by optimism over India’s economy.
The total value of shares listed on Indian exchanges hit $4.3 trillion on Monday, slightly higher than Hong Kong’s $4.29 trillion, according to data compiled by Bloomberg.
London, Paris and Frankfurt rose at the open.
Investors were given a healthy lead from New York, where the S&P 500 clocked a second successive record and the Dow also hit a new high.
That comes on the back of a renewed belief in the US economy, which continues to show resilience in the face of two-decade-high interest rates, with consumer confidence rising and inflation expectations falling.
Traders had started the year on a somewhat sour note as a string of figures and warnings from Federal Reserve officials all but doused expectations rates will be cut in March and keep coming down through 2024.
“The story is changing for bulls,” said David Donabedian at CIBC Private Wealth US.
“Investor optimism had been driven by the belief there would be aggressive rate cuts by the Fed. Now investor belief has pivoted to view the economy as bullet-proof. No matter how high interest rates go, the economy will continue to glide right through.”
Investors are also gearing up for the release of corporate earnings, with market titans including Procter & Gamble, Tesla, IBM, Intel and Netflix due to report this week.
Key figures around 0810 GMT –
Tokyo – Nikkei 225: DOWN 0.1 percent at 36,517.57 (close)
Hong Kong – Hang Seng Index: UP 2.6 percent at 15,353.98 (close)
Shanghai – Composite: UP 0.5 percent at 2,770.98 (close)
London – FTSE 100: UP 0.4 percent at 7,517.74
Dollar/yen: DOWN at 147.56 yen from 148.13 yen on Monday
Euro/dollar: UP at $1.0908 from $1.0885
Pound/dollar: UP at $1.2742 from $1.2708
Euro/pound: DOWN at 85.60 pence from 85.63 pence
West Texas Intermediate: UP 0.4 percent at $75.07 per barrel
Brent North Sea Crude: UP 0.4 percent at $80.35 per barrel
New York – Dow: UP 0.4 percent at 38,001.81 (close)
