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Asian Stocks Rebound After China Borrowing Rate Boost

Stocks in Hong Kong, Tokyo and mainland China all advanced off the back of the higher-than-expected benchmark borrowing rate cut on Friday

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Asian Stocks were up across the board on Friday.
Chinese stocks closed at their highest level since early March on Friday, gaining for a fourth straight week. File photo: Reuters.

 

Asian stocks surged on Thursday, lifted by China’s move to lower a key mortgage benchmark rate and hopes it could help turn around the fortunes of the world’s No-2 economy.

Downbeat earning reports from retailers have darkened the mood across trading floors this week with traders already worried about rising interest rates, surging energy prices, China’s Covid lockdowns and Russia’s ongoing war in Ukraine.

But there was a positive response across Asia after Chinese banks cut the benchmark reference rate for mortgages by an unexpectedly wide margin, in a bid to revive its ailing housing sector and to prop up a slowing economy hit by multiple Covid-19 outbreaks.

 

Read more: China Cuts Mortgage Reference Rate to Bolster Economy

 

China’s blue-chip CSI300 index rose 2.0%, to 4,077.60, while the Shanghai Composite Index gained 1.60% to 3,146.57 points.

Those gains came after the five-year loan prime rate (LPR) was lowered by 15 basis points to 4.45% from 4.60%, while the one-year LPR was unchanged at 3.70%.

This followed Sunday’s move by China’s central bank to reduce the lower limit of interest rates on home loans by 20 basis points.

“The intent and message from these two consecutive policy moves are very clear: Beijing wants to rescue the property markets,” Nomura analysts said in a note.

Nomura analysts led by Lu Ting said the impact will likely be limited, as the mortgage rate cut is small compared with previous down cycles, while mortgage rates have already started to decline, even before recent policy moves.

Shares of real estate developers still dropped 1.4% following the rate cut, after a 2.3% jump in the previous session. Meanwhile, coal miners, liquor makers and transport companies jumped at least 4% each.

 

MSCI World Equity Index Slides

Hong Kong stocks were boosted by China’s rate move too and the Hang Seng Index rose 2.96%, or 596.56 points, to 20,717.24.  The mainland’s second index, the Shenzhen Composite, rose 1.59%, or 30.97 points, to 1,983.67.

Tokyo stocks ended higher as well, reversing overnight falls on Wall Street as bargain-hunting purchases offset risk-off sentiment among investors.

The benchmark Nikkei 225 index advanced 1.27%, or 336.19 points, at 26,739.03, while the broader Topix index added 0.93%, or 17.29 points, to 1,877.37.

Indian stocks surged ahead too with Mumbai’s signature Nifty 50 index up 2.43%, or 383.65 points, at 16,193.05.

Globally, shares enjoyed a rebound off China’s lending rate move, though a global equities gauge remains set for its longest weekly losing streak on record amid investor worries about slowing growth and high inflation. 

The MSCI world equity index, which tracks shares in 50 countries, rose 0.5%, but for the week was still shedding 1% and on track for its seventh consecutive weekly decline, its longest losing streak since its inception in 2001. It would also be the longest if back-tested data extending to January 1988 was included.    

 

Dollar Index Trading Flat

The gains in Europe and Asia came after a late Thursday rally on Wall Street petered out, leaving the Dow Jones Industrial Average down 0.75%, the S&P 500 0.58% lower and the Nasdaq Composite off by 0.26%.

In currency markets, moves were relatively muted with the dollar little changed but still headed for its worst week since early February, after a 10%, 14-week surge.

The dollar index, which measures the currency against six major rivals, was trading flat at 102.91.

Oil prices were lower as investors worried that weakening global economic growth and tighter central bank monetary policy could curb a recovery in fuel demand.

Bitcoin was flat at $30,295. Smaller rival Ether was up 0.6% at $2,030. 

 

Key figures at around 0720 GMT

Hong Kong – Hang Seng Index > UP 3.0% at 20,717.24 (close)

Shanghai – Composite > UP 1.6% at 3,146.57 (close)

London – FTSE 100 > UP 1.3% at 7,396.82

Tokyo – Nikkei 225 > UP 1.3% at 26,739.03 (close)

West Texas Intermediate > DOWN 0.5% at $111.65 per barrel

Brent North Sea crude > DOWN 0.3% at $111.75 per barrel

New York – Dow > DOWN 0.8% at 31,253.13 (Thursday 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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