Asian Stocks Rise as China Announces Stimulus Plans
Positive Overnight Session on Wall Street Boosts Asian Stocks
Most Asian stocks rose on Wednesday, following a positive overnight session on Wall Street. Chinese stocks extended their recovery rally after the government announced plans for a massive bond issuance, contributing to the overall positive sentiment.
Decline in Treasury Yields Benefits Local Technology Stocks
Local technology stocks benefitted from a decline in Treasury yields and positive overnight earnings from Microsoft Corp (NASDAQ:). Japan’s index jumped over 1%, primarily driven by strength in tech and industrial stocks, while the broader index also added 1%.
Broad Asian Stocks Advance, But Steep Losses for October
Although broader Asian stocks advanced, they were still recovering from steep losses in October. Risk sentiment remained fragile due to the Israel-Hamas war, and markets were also concerned about rising U.S. interest rates ahead of the next week’s decision.
Chinese Stocks Rebound on Bond Issuance News
Hong Kong and Chinese markets were the best performers for the day, with the indexes up 0.8% each, while the surged 2.5%. Beijing’s announcement of plans to issue 1 trillion yuan ($1= 7.3088 yuan) in government bonds to support the economy boosted investor confidence. The issuance will primarily focus on infrastructure spending, including rebuilding disaster-hit areas and reinforcing relief capabilities. Construction and utility stocks performed well in response to this news. Additionally, Chinese stocks were buoyed by Central Huijin, a sovereign fund, announcing its purchase of local exchange-traded funds.
Chinese Markets Remain Close to 2023 Lows
Despite the optimism surrounding Wednesday’s market performance, Chinese stocks remained close to their lowest levels since 2023. Concerns over an economic slowdown and a property market meltdown have contributed to the ongoing challenges faced by Chinese markets. However, it is worth noting that Chinese markets have been among the worst performers in Asia this year.
South Korea’s Market Declines, Australia’s Flat
In South Korea, the market fell 0.2% as data showed local worsening in October. Australia’s market remained flat, with optimism over China offset by data showing stronger-than-expected growth in the third quarter, potentially leading to an interest rate hike by the next week.
Futures for India’s Index Point to Weaker Open
Futures for India’s index indicate a weaker open as traders continue to lock-in profits after a strong run of gains this year. The Nifty has experienced a decline of nearly 2% in October, following record highs in the previous month.
Markets Await Federal Reserve’s Monetary Policy Decision
Markets remain on edge as they await further signals on monetary policy from the Federal Reserve, which is set to decide on interest rates next week. The release of October’s improved data on U.S. has given the Fed more room to keep rates higher. Federal Reserve Chairman, Jerome Powell, is scheduled to speak at the Moynihan Lecture in Social Science and Public Policy in Washington, D.C. later in the day. Powell has recently reiterated the possibility of at least one more rate hike this year, emphasizing that rates will remain higher for a longer duration.
Higher Rates Diminish Appeal of Risk-Driven Assets
Higher rates pose challenges for most Asian markets as they diminish the appeal of risk-driven assets and impact capital flows into the region.
