Shares in Hong Kong and Shanghai continued to rally on Wednesday on hopes of more Chinese measures to support struggling markets, while traders elsewhere in Asia watched Wall Street rally on strong earnings.
Fresh comments from Federal Reserve officials that poured cold water on hopes of an early rate cut appeared to have little impact as investors gave up on the prospect of monetary policy remaining tight through 2024.
A series of announcements from Beijing ignited shares in Hong Kong and Shanghai this week, with Bloomberg reporting that companies have spent more than $4 billion on acquisitions after officials urged them to play their part.
The rise on Tuesday came after a unit that controls state stakes in major financial institutions said it would increase investment in mutual funds, while regulators said they would demand more action from long-term funds.
Markets Mixed After Wall St Losses, Shanghai and Hong Kong Rally
The developments follow a long-running rout in Shanghai and Hong Kong — fueled in large part by worries about China’s economy — that has slashed trillions in valuations.
The crisis is becoming increasingly uncomfortable for the leadership, with Xi Jinping reportedly taking a personal interest.
“Sentiment improved after (Tuesday’s) rally in China and Hong Kong stocks,” said Capital.Com’s Kyle Rodda.
“So far, the measures have had the desired effect,” he added, noting that markets are reaching levels that could signal the end of their bearish run.
Shanghai and Hong Kong jumped more than one percent on Wednesday — a day after rallying more than 3 percent and 4 percent respectively.
But observers warned the measures would not be enough on their own to revive jittery investor confidence, adding that much more needed to be done to jump-start the world’s number two economy and address the property debt crisis .
Asian markets take a hit as U.S. jobs hopes fall
And Saxo’s Redmond Wong said in a note: “In our view, the boost from market intervention tends to fade within a few days.”
There were also gains on Wednesday in Sydney, Seoul, Singapore, Wellington, Manila and Jakarta, although Tokyo slipped.
The advance came after Wall Street’s three main indexes posted small gains thanks to healthier corporate results, including from Spotify and data analytics firm Palantir, which jumped more than 30 percent on optimism about artificial intelligence offerings.
That helped investors look past comments from two top Fed officials pushing against an early rate cut.
Cleveland Fed President Loretta Mester said it would be a “mistake” to move too soon, even as inflation continues to ease closer to the bank’s two percent target.
He said policymakers would be more than happy to “start moving interest rates down” later this year if the economy plays out as expected.
And his Minneapolis counterpart, Neel Kashkari, also suggested more progress is needed.
Asian markets rise after Wall St’s tech rally
While sentiment has improved at trading levels, investors still question a number of issues that could explode, including the wars in Ukraine and the Middle East, China-US tensions, China’s property crisis and the global economy.
Commonwealth Financial Network’s Brad McMillan warned: βWhile conditions are good, volatility is very likely.
“We saw some turbulence in January and we’re still not out of inflation. So while trends remain positive, risks could increase over the next couple of months.”
However, he added: “This is something to watch out for, but not to worry too much about given the strong financials.”
Keys around 02:30 GMT
Tokyo – Nikkei 225: Down 0.1 percent at 36,122.57 (break)
Hong Kong – Hang Seng Index: UP 1.3 percent at 16,342.71
Shanghai – Composite: UP 1.2 percent to 2,822.70
Dollar/yen: DOWN at 147.77 yen from 147.91 yen on Tuesday
The IMF says central banks should not rush into rate cuts
EUR/USD: UP at $1.0764 from $1.0758
Pound/Dollar: UP to $1.2612 from $1.2600
Euro/pound: DOWN to 85.34 pence from 85.36 pence
West Texas Intermediate: UP 0.3 percent to $73.55 a barrel
North Sea Brent crude: UP 0.3 percent to $78.80 a barrel
New York – Dow: UP 0.4 percent at 38,521.36 (close)
London – FTSE 100: UP 0.9 per cent at 7,681.01 (close)
Source: AFP