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Asia Stocks Rally as Oil Dips But Covid Drags on China

China stocks bucked the regional trend as persistent Covid-19 outbreaks darkened the economic outlook for the world’s No2 economy


Asian shares were mixed on Thursday, with the Nikkei up but China stocks edging lower again on Covid concerns.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3% on Thursday. Photo: AFP

 

Asia’s markets rallied on Thursday off the back of falling oil prices with China’s markets the outlier as Covid continued to hamper the country’s economic recovery.

The bounce-back was led by Japan’s Nikkei, which hit a one-week high tracking a strong Wall Street and boosted by a weak yen, but China’s mainland bourses and Hong Kong all suffered.

The Nikkei jumped 2.3% to 28,065.28, its highest closing level since August 31. The index also saw marked its biggest daily gain in four weeks.

The broader Topix ended a six-session losing streak, jumping 2.2% to 1,957.62.

 

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The dollar hovered near a two-decade high on Thursday, after surging to a 24-year peak against the yen overnight, as Japan’s dovish monetary policy contrasted with a hawkish Federal Reserve.

“A weakening yen is basically good for Japanese exporters and that could boost their earnings per shares,” Shuji Hosoi, senior strategist at Daiwa Securities, said.

China stocks, though, closed lower defying the border Asian rally, as lingering domestic Covid-19 outbreaks kept sentiment subdued clouding the economic outlook.

Chengdu, the capital of the southwestern Chinese province of Sichuan, extended a lockdown in most of its districts, to stem further transmission of Covid-19 in the city of 21.2 million people.

The Shanghai Composite Index dipped 0.33%, or 10.71 points, to 3,235.59, while the Shenzhen Composite Index on China’s second exchange dropped 0.89%, or 18.80 points, to 2,104.39.

Hong Kong’s main benchmark, meanwhile, dropped for a sixth consecutive session, hovering around a half-year low. Energy shares lost 1.6% in mainland markets, while tumbling 3.2% in Hong Kong.

And the Chinese city of Zhengzhou vowed to start building all stalled housing projects within 30 days. However, mainland property developers listed in Hong Kong fell 2.4%.

The Hang Seng Tech Index closed 1% lower, with Tencent plunging 3.2% to become the biggest drag on the Hang Seng benchmark which dropped 1.00%, or 189.68 points, to 18,854.62.

 

Investors Wait on Fed Chair Powell

Elsewhere across the region, other Asian stocks gained, extending an overnight global rally, as investors awaited US Federal Reserve chair Jerome Powell’s speech later in the day for signs of any let-up in the central bank’s hawkish approach to tame inflation.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3%, while Australia’s S&P/ASX 200 gained 1.7%.

Equities in Singapore and Indonesia rose 0.9% each to lead the gains, followed by Philippine stocks, which climbed 0.6%. Stocks in Malaysia and Thailand also advanced.

Indian stocks advanced too with Mumbai’s signature Nifty 50 index up 0.84%, or 148.30 points, at 17,772.70.

Globally, stocks and bond yields shuffled higher while the euro slipped back, as investors waited to see if the European Central Bank would fight runaway inflation later with a record 75 basis point interest rate hike, or go smaller.

A drop in oil below $90 a barrel, growing speculation about Japanese FX market intervention and an expected UK energy price plan later meant traders had plenty on their plates before the ECB’s decision.

The dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was up slightly at 109.73.

 

Key figures

Tokyo – Nikkei 225 > UP 2.3% at 28,065.28 (close)

Hong Kong – Hang Seng Index < DOWN 1% at 18,854.62 (close)

Shanghai – Composite < DOWN 0.3% at 3,235.59 (close)

New York – Dow > UP 1.4% at 31,581.28 (Wednesday close)

 

  • Reuters with additional editing by Sean O’Meara

 

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Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.

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