Markets

Asia Stocks Rally on Sino-US Tensions Thaw, China Covid Hopes

 

Asia stock indexes gained more ground on Tuesday, boosted by stimulus hopes and Covid curbs easing in China, as well as signs of a thaw in China-US tensions and some bargain-buying too.

Investors across the Asia-Pacific were lifted by a meeting between China’s president Xi Jinping and US President Joe Biden, who spoke for three hours on Monday in Bali on the sidelines of the G20 gathering.

And there was another bounce for traders as they digested the economic implications of China’s Covid-19 policy adjustments and a rescue package for the country’s struggling property sector.

 

Also on AF: US, Europe Chase Cheaper EV Battery to Curb China Dominance

 

All these factors came together to fuel rallies across the region’s major bourses though Japan’s Nikkei index edged higher thanks to some significant bargain-buying as well, even as data showed a surprise contraction in the domestic economy.

The Japanese economy unexpectedly shrank for the first time in a year in the third quarter, as global recession risks, a weak yen and sharply higher import costs took a toll on household consumption and business activity.

The benchmark Nikkei 225 index rose 0.10%, or 26.70 points to end at 27,990.17. The broader Topix index gained 0.37%, or 7.32 points, to 1,964.22.

Chinese data out on Tuesday was also not encouraging but did little to quell the stockmarket bounce.

Industrial output rose in October was up 5.0% on a year earlier, slowing from the 6.3% annual pace seen in September, while retail sales fell 0.5%, the first drop since May, when Shanghai was under a city-wide lockdown. Analysts had expected retail sales to rise 1.0%.

In Hong Kong, the Hang Seng Index surged by more than 4% while China’s CSI300 Index reversed an earlier weaker start to be up by 1.77%. In a striking bounce, the Hang Seng index is up nearly 25% for the month while the CSI300 has gained 10% in that time.

Some Chinese cities have begun cutting routine community testing, days after China announced an easing of some of its heavy-handed coronavirus measures. At the same time, however, Covid case numbers in the country have grown.

“Investors are buying first and then asking questions later,” Jack Siu, China chief investment officer at Credit Suisse, said, referring to the bounce in Hong Kong and mainland stocks.

However, he cautioned, “while the Covid changes and housing package will alleviate some of the downside risks, it won’t be enough to meaningfully boost Chinese economic growth yet.”

 

Xi, Biden Pledge to Talk More

The Hong Kong and Chinese stock bounce came after the US and China’s presidents spoke, with a pledge of more frequent communications welcomed by investors.

Hong Kong’s Hang Seng index was 4.11% higher, closing at 18,343.12, lifted by the Hang Seng Tech index that climbed 7.3%.

In mainland China, the Shanghai Composite advanced 1.64% to 3,134.08, while the Shenzhen Component also gained 2.14% to 11,351.33 as the country’s industrial production and retail sales data fell short of expectations.

Elsewhere across the region, in Australia, the S&P/ASX 200 slipped 0.07% while South Korea’s Kospi added 0.23%. 

Indian stocks were up with Mumbai’s signature Nifty 50 index rising 0.41%, or 74.25 points, to close at 18,403.40.

 

Oil Drops on China Lockdown Fears

In early European trades, the pan-region Euro Stoxx 50 futures were up 0.21% at 3,892, German DAX futures were 0.09% higher at 14,338 and FTSE futures were down 0.18% at 7,379.

US stock futures, the S&P 500 e-minis, were up 0.48% at 3,985.

In contrast to stocks, oil dropped on that fears China could impose further lockdowns in some cities. US crude fell 0.43% to $85.43 a barrel while Brent crude slipped 0.2% to $92.81.

In Asian hours, Bitcoin rose 1.1% to $16,593. US regulators opened probes into the collapse of crypto exchange FTX while other major crypto exchanges have rushed to assure investors of their stability in the FTX fallout. Bitcoin remains down 64.2% so far in 2022.

Inflation in the United States remains at the top of the minds of many global investors, who are waiting for producer price index data later on Tuesday.

The dollar rose 0.25% against the yen to 140.23 . It is still some distance from its high this year of 151.94 on October 21.

 

Key figures

Tokyo – Nikkei 225 > UP 0.10% at 27,990.17 (close)

Hong Kong – Hang Seng Index > UP 4.11% at 18,343.12 (close)

Shanghai – Composite > UP 1.64% at 3,134.08 (close)

London – FTSE 100 > UP 0.10% at 7,392.26 (0935 GMT)

New York – Dow < DOWN 0.63% at 33,536.70 (Monday close)

 

  • Reuters with additional editing by Sean O’Meara

 

Read more:

China’s Economy Slows as Retail Sales, Factory Output Slip

Fears of Lockdown in Guangzhou as China’s Covid Cases Rise

 

 

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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