Asian shares rallied to two-week highs yesterday, building on strong global gains after the world’s six major central banks moved to tame a liquidity crunch for European banks by providing cheaper US dollar funding.
The US Federal Reserve, the European Central Bank (ECB) and the central banks of Canada, Britain, Japan and Switzerland said on Wednesday they would lower the cost of existing US dollar swap lines by 50 basis points from Monday and arrange bilateral swaps to provide liquidity for other currencies.
MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 4.4 percent to its highest since the middle of last month, rising above a 25-day moving average, after US stocks soared 4 percent on Wednesday.
Japan’s Nikkei also surged well above its 25-day moving average, closing up 1.9 percent.
Chinese shares outperformed, with the Hang Seng Index soaring 5.63 percent to 19,002.26 after Beijing cut the reserve requirement ratio for commercial lenders on Wednesday for the first time in three years, signaling a policy shift as global weakness weighs on China’s economy.
The Shanghai Composite Index, which covers both A and B shares, gained 2.29 percent to 2,386.86.
Taipei surged 3.98 percent, Seoul closed 3.72 percent higher at 1,916.18 and Sydney was 2.64 percent higher at 4,228.6. Manila gained 1.89 percent and Wellington rose 0.22 percent.
The euro changed hands at US$1.3455 after jumping to a one-week high of US$1.3531 on Wednesday, while the US dollar index slumped to a two-week low of 77.923.
“The moves were cheered by markets, as it shows central banks are willing to work together to ease Europe’s sovereign debt crisis,” said Stan Shamu, strategist at IG Markets.
However, some analysts were more cautious, saying the central banks’ moves just bought more time for Europe as it battles to contain its worsening debt crisis.
“This just means they expanded emergency measures. The more important point is whether Europe is going to have a bigger bailout fund and that’s still up in the air,” said Soichiro Monji, chief -strategist at Daiwa SB Investments, in Tokyo.
The central banks’ move could warm investor sentiment toward riskier assets as it aims to ease severe funding strains for European banks as money markets seized up as a result of European debt woes.
However, European officials have so far failed to nail down who will finance a bailout scheme, which is vital to keeping the crisis from engulfing the continent’s biggest economies.
Gold held steady at a two-week high of about US$1,750 an ounce, after rising nearly 2 percent on Wednesday, when investors sought a hedge against currency depreciation after the central bank action.
The liquidity action by central banks came a day after European officials agreed to strengthen the region’s rescue fund and seek more aid from the IMF.
Germany suggested it was open to increasing the IMF’s resources through bilateral loans or more special drawing rights, reversing the stance Berlin took earlier this month at the Cannes G20 summit.
The policy shift came as Germany presses its EU partners to agree to treaty changes to create coercive powers to make eurozone countries change their budgets if they breach EU deficit and debt rules, at a EU summit scheduled for next Friday.
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to