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China arises hopes help boost Asian markets Fed in focus

As a result of China’s pledge to bolster the country’s sluggish economy, Hong Kong’s gain pushed Asian markets higher.

Chinese leaders pledged new measures to bolster the nation’s sputtering economy on Tuesday, boosting optimism that central banks were nearing the end of their rate-hiking cycle. Hong Kong led gains across most Asian markets.

Beijing is under pressure to provide much-needed support, particularly for the expansive real estate industry, as recent data indicate a slowdown in economic development and business activity.

Despite a series of announcements and minor interest rate reductions, investors have been largely dissatisfied with the policy response from authorities, as few concrete measures have been introduced.

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On Monday, however, top leaders signaled a renewed drive to get the post-Covid recovery back on track, particularly the troubled property sector, which accounts for a significant portion of the second-largest economy in the world.

After a meeting, the 24-member Politburo acknowledged that “the current economic operation faces new difficulties and challenges” and agreed that “precise and effective macroeconomic regulation, strengthened countercyclical regulation, and policy reserves” must be implemented.

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CCTV reports that the meeting presided over by President Xi Jinping, also called for efforts to expand domestic consumption and “adjust and optimize real estate policies in a timely manner.”

“The overall stance remains pro-growth, but there is a greater emphasis on addressing structural challenges (such as local government debt) to facilitate longer-term sustainable growth,” HSBC’s Erin Xin explained.

She added that the announcement “maintains a supportive tone, which can provide some support for the recovery and may boost market sentiment.”

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The news gave investors a boost, with Hong Kong increasing by more than three percent due to a surge in real estate and technology companies.

The majority of market gains are driven by rate optimism, but China worries weigh on performance.

“Investors now believe the Politburo meeting sets an encouraging tone for more substantial and comprehensive policy easing down the road,” said Stephen Innes of SPI Asset Management.

“Why is this time different? Because legislators acknowledged the issue. And to solve any problem, you must admit that there is one.”

Shanghai, Sydney, Seoul, Singapore, Taipei, Manila, and Jakarta increased as well, whereas Tokyo and Wellington declined.

Nonetheless, Kiyong Seong of Societe Generale remarked, “Overall, the Politburo lacked so-called ‘bazooka stimulus.'”

“I don’t anticipate a sustained impact on the market unless there are a series of concrete, strong steps.”

The gains followed a positive performance on Wall Street, where the Dow recorded its best run since 2017 with eleven consecutive gains.

After more than a year of tightening, investors are increasingly confident that the Federal Reserve’s anticipated rate increase this week will be its last. As a result, US markets have enjoyed a strong start to 2023.

After a dismal second quarter, Goldman Sachs anticipates a rebound in merger activity.

The decline in inflation and indications that the country’s economy remained robust have fueled optimism that officials can bring prices under control without triggering a recession.

A generally positive earnings season to date has also boosted sentiment on trading platforms, while this week’s releases from Google owner Alphabet, Facebook parent Meta, and Microsoft will be closely monitored by investors.

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The European Central Bank’s policy decision is also imminent, with some analysts predicting that it will soon conclude its own tightening campaign.

As a result of declines in manufacturing, economic activity in the eurozone contracted at its quickest rate in eight months in July, prompting this meeting.

The reading weighed on the euro on Monday, and its decline against the dollar accelerated in Asian trading.

Statistical data around 02:30 GMT

Tokyo – Nikkei 225: DOWN 0.3 percent at 32,605.97 (break)

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  1. Shanghai – Composite: UP 1.6 percent at 3,213.68
  2. Euro/dollar: UP at $1.1073 from $1.1067 on Monday
  3. Pound/dollar: UP at $1.2837 from $1.2821
  4. Euro/pound: DOWN at 86.26 pence from 86.29 pence
  5. Dollar/yen: DOWN at 141.30 yen from 141.51 yen
  6. West Texas Intermediate: UP 0.2 percent at $78.80 per barrel
  7. Brent North Sea crude: UP 0.1 percent at $82.85 per barrel
  8. New York – Dow: UP 0.5 percent at 35,411.24 (close)
  9. London – FTSE 100: UP 0.2 percent at 7,678.59 (close)

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