Shares in Hong Kong and China rocketed yesterday, extending last week’s surge after Chinese authorities unveiled a raft of measures aimed at propelling the world’s No. 2 economy.
However, Tokyo plunged as much as 5 percent in reaction to Shigeru Ishiba’s election last week as the head of Japan’s ruling Liberal Democratic Party, which boosted expectations that the Bank of Japan would continue hiking interest rates.
Shanghai jumped more than 8 percent — its best day since 2008 — and Shenzhen more than 10 percent, while Hong Kong briefly leaped around 4 percent.
Photo: Bloomberg
Investors have been rushing back into the beaten-down markets in reaction to a series of economy-boosting stimulus out of Beijing over the past week.
Among the measures unveiled were interest rate cuts, easing how much banks must keep in reserve and softer rules on buying homes.
Yesterday, three megacities — Shanghai, Guangzhou and Shenzhen — eased restrictions on buying homes, while six of China’s biggest banks said they would tweak interest rates on mortgages for existing home loans following a request to lower them from the central bank.
The rally — which has seen Shanghai rise more than 20 percent in the past six trading days — comes a day before Chinese markets are closed for the Golden Week holiday.
Moody’s Analytics economist Harry Murphy Cruise said the moves “signal growing unease about the health of China’s economy.”
“That officials brought forward economic discussions to this week’s politburo meeting — rather than sticking to the December schedule — highlights the urgency of the problem,” Cruise said.
The need for stimulus support was highlighted yesterday by data showing China’s factory activity shrank last month for the fifth successive month.
Still, XTB research director Kathleen Brooks said that “the market is not focused on this data, as it is measuring activity before the massive stimulus package, instead, October’s data will matter more for markets.”
The euphoria in China and Hong Kong was in stark contrast to Tokyo, where the Nikkei 225 index plunged as the yen strengthened in the wake of Ishiba’s victory.
Ishiba is expected to maintain many of his predecessor Japanese Prime Minister Fumio Kishida’s policies, but he has also said that “there is room for raising the corporate tax,” while promising to revitalize rural regions.
“Our view is that the basic economic policy philosophy will not change,” UBS Securities Japan Co chief economist Masamichi Adachi said.
Exporters were the big losers as the yen spiked to 141.65 per US dollar in reaction to Ishiba’s win, which observers said would mean the central bank would likely press on with its monetary tightening campaign. The unit had been sitting around 146.50 before Friday’s vote.
Markets were mixed elsewhere in Asia. Taiwanese shares ended down 2.62 percent, and markets in Seoul, Wellington, Mumbai, Manila and Jakarta were also in the red, while Sydney, Bangkok and Singapore rose.
European shares moved lower yesterday. London fell as data showed the UK economy grew less than initially estimated in the second quarter, with Paris and Frankfurt also down.
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‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
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