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Asia Stocks Rally on Earnings, China Stimulus Pledges

Investors were in calmer mood on Thursday after the turbulence caused by Nancy Pelosi’s controversial visit to Taiwan


Asian investors targeted more robust stocks on Monday as cautious bargain-buying took place ahead of the release of key US consumer data this week.
Stock quotation boards are seen at the Tokyo Stock Exchange. Photo: Reuters.

 

Asian stocks rallied on Thursday as traders put geopolitical tensions to the back of their minds and focused on positive earnings reports and major infrastructure pledges in China.

Tensions over Taiwan, sparked by US House of Representatives Speaker Nancy Pelosi’s shock visit to the self-ruled island, were put to one side as investors recovered their losses after Wednesday’s turbulence.  

Japanese stocks gained on Thursday despite an afternoon plunge in Toyota Motor Corp as the country’s biggest automaker posted a large drop in quarterly earnings.

 

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Japan’s Nikkei share average closed up 0.7% at 27,932.20 after briefly breaking through the 28,000 barrier, which it hasn’t finished above since June 9.

The broader TOPIX index was more muted, closing flat at 1930.73 after bouncing between positive and negative territory throughout the day.

Toyota fell 3.45% after it released its earnings report, which showed a 42% year-on-year decline in operating profit, before paring losses slightly to close down 3%.

Rival automaker Subaru Corp though was the best performer on the Nikkei on Thursday, gaining 8.5% after a positive earnings report and optimistic forecasts for future sales in the United States.

Casio Computer gained the most after Subaru, adding 6.3% after forecasting stronger profits for its current financial year.

Investors also eyed video-game maker Nintendo after it announced a year-on-year slump in Switch console sales, but the stock gained 0.4%. The company’s unit sales forecast for the current fiscal year remains unchanged.

 

China Infrastructure Projects

China and Hong Kong stocks rose as investors reacted positively to a raft of newly launched infrastructure projects that Beijing hopes can help stabilise its Covid-hit economy.

In July, China started 3,876 major construction projects, involving a total investment of 2.4 trillion yuan ($355.33 billion), the Securities Times said on Thursday.

And in the second half of the year, China’s State Grid plans to invest more than 150 billion yuan in ultra-high-voltage (UHV) power transmission lines, state media Xinhua News reported.

China’s blue-chip CSI300 Index climbed 0.9%, while the Shanghai Composite Index was up 0.8%, or 25.36 points, to 3,189.04.

The Hang Seng Index rose 2.1%, or 406.95 points, to 20,174.04, led by technology shares and the Shenzhen Composite Index on China’s second exchange advanced 0.9%, or 18.14 points, to 2,135.33.

In Hong Kong, the Hang Seng Tech Index jumped 3.2% with shares of Alibaba jumping 5.2% as the Chinese tech giant is set to report its earnings on Thursday. Trip.com, Baidu and Bilibili all rose more than 4%.

Elsewhere across the region, equities were mixed with markets in Malaysia, Thailand and South Korea advancing as much as 0.7%, while benchmarks in the Philippines, Taiwan and Indonesia slipped up to 0.5%.

Indian stocks dipped with Mumbai’s signature Nifty 50 index down 0.34%, or 58.30 points, at 17,329.85.

 

Bank of England Rate Hike

Globally, strong earnings from the likes of Credit Agricole and Lufthansa lifted stocks as tension over Pelosi’s visit to Taiwan eased and markets bet the Bank of England will hike interest rates by the largest amount since 1995 to quell inflation.

Oil prices rebounded from six-month lows, while the dollar was underpinned by US Federal Reserve officials pushing back against suggestions they will slow the pace of interest rate hikes, with one saying a 50 basis point hike would be “reasonable.”

S&P 500 futures were little changed ahead of Wall Street’s open, with Friday’s non-farm payrolls a key piece of data for the week.

An ISM survey on Wednesday showed the US services industry unexpectedly picked up in July, prompting a sell-off in bonds and rallies for US stocks and the dollar, with the Nasdaq up 2.5% to a three-month high.

Fed officials have provided a hawkish chorus this week, battering the short end of the yield curve. Two-year Treasury yields were trading at 3.1040%, while the benchmark 10-year year yields traded at 2.7318%, both slightly weaker.

The dollar has halted a decline that began in the middle of July, with support from both hike expectations and heightened political tension.

Brent crude futures were slightly weaker at $96.75 a barrel as supply concerns triggered a rebound from multi-month lows on Wednesday after US data signalled weak fuel demand.

 

Key figures

Tokyo – Nikkei 225 > UP 0.7% at 27,932.20 (close)

Hong Kong – Hang Seng Index > UP 2.1% at 20,174.04 (close)

Shanghai – Composite > UP 0.8% at 3,189.04 (close)

New York – Dow > UP 1.3% at 32,812.50 (Wednesday close)

 

  • Reuters with additional editing by Sean O’Meara

 

Read more:

Toyota Suffers Shock 42% Profit Drop in June Quarter

Japan PM Wants Wage Hikes to Help Households Battle Inflation

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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