Markets

Hang Seng Leads Asia Shares Surge on China Covid Hopes

A man stands on an overpass with an electronic board showing Shanghai and Shenzhen stock indexes in Shanghai. Photo: Reuters

Asian indexes were on the front foot on Friday, buoyed by better than expected news on US inflation and new hopes that China was planning to rein back on its strict Covid-curbing policies after it eased some quarantine rules.

The rally was sparked after US stocks jumped overnight as cooler inflation data suggested the Federal Reserve’s barrage of interest rate hikes are beginning to have their intended effect.

All three major US stock indexes notched their biggest one-day percentage gains in about two-and-a-half years and that fed into Asia’s markets where investors were hungry for good news.

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The rally then accelerated after it emerged Chinese health authorities had eased some of the country’s heavy Covid-19 curbs, including shortening by two days the quarantine times for close contacts of cases and inbound travellers.

Japan’s Nikkei index was the first to surge, ending at a two-month high, led by Tokyo Electron and other growth stocks.

The Nikkei jumped 2.98% to end at 28,263.57, its highest close since September 13. The index gained 3.91% this week, marking a third straight weekly gain. The broader Topix climbed nearly 2.12% to 1,977.76 and rose 3.26% for the week.

Chip equipment maker Tokyo Electron jumped 8.43% and provided the biggest boost to the Nikkei, despite cutting its annual profit forecast.

Chinese stocks rallied hard following that jump on Wall Street and then the Politburo Standing Committee (PSC) revealing its Covid quarantine rules changes.

That came just a day after China’s new top leadership body reaffirmed Beijing’s “dynamic-zero” Covid-19 policy on Thursday, as authorities stepped up lockdowns and other curbs to halt clusters from spreading as infections soared to their highest since this year’s Shanghai lockdown.

The Hang Seng Index surged 7.74%, or 1,244.62 points, to 17,325.66, while the Shanghai Composite Index rose 1.69%, or 51.16 points, to 3,087.29.

The Shenzhen Composite Index on China’s second exchange advanced 1.31%, or 26.13 points, to 2,017.96.

Hong Kong Tech Giants Surge

Citi analysts said local governments’ response is the next key watch point. “Since Covid prevention is often overdone at local level, a correction in implementation will be a de facto easing,” they said.

Tech giants listed in Hong Kong surged roughly 10% at the open and were up 6.5% by midday, tracking a 7.6% overnight jump in the Nasdaq Golden Dragon China Index.

Chinese property developers rallied 5.4% in the mainland, and their peers trading in Hong Kong rose nearly 7%, amid the country’s latest measures to support the crisis-ridden sector.

MSCI’s broadest index of Asia-Pacific shares outside Japan soared 5.33%, set for its biggest one-day percentage jump since March 2020. The index is down 23% for the year but is heading for a weekly gain of more than 7%, the biggest in more than two years.

Elsewhere across the region, Australia’s S&P/ASX 200 index closed up 2.73% while Indian stocks advanced too, with Mumbai’s signature Nifty 50 index up 1.82%, or 328.30 points, to close at 18,356.50.

Globally, the dollar wobbled after slowing US inflation data sparked hopes that the Federal Reserve could tone down its aggressive interest rate hikes.

European markets were set to extend the exuberant mood, with the pan-region Euro Stoxx 50 futures up 0.62%, German DAX futures 0.70% higher and FTSE futures up 0.11%.

FTX Crypto Crisis Continues

Data on Thursday showed that the US consumer price index had been 7.7% higher in October than a year earlier. It was the first annual increase of less than 8% since February and the smallest since January.

“It’s something the market had been waiting for a long time,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital. “There was a lot of money sitting on the sidelines.”

Investors poured into risky assets after the data, sending the dollar tumbling and US Treasury yields to a five-week low.

Elsewhere, the crypto world remained gripped by the outlook for the crypto exchange FTX. Regulators froze some assets of FTX and industry peers raced to limit losses amid worsening solvency problems.

The firm was scrambling to raise about $9.4 billion from investors and rivals in a bid to save the firm, it was reported. Bitcoin fell 1.44% to $17,295.

Meanwhile, oil prices rose on Friday after the US inflation data but were on track for weekly declines of more than 4% due to Covid-related worries in China.

Key figures

Tokyo – Nikkei 225 > UP 2.98% at 28,263.57 (close)

Hong Kong – Hang Seng Index > UP 7.74% at 17,325.66 (close)

Shanghai – Composite > UP 1.69% at 3,087.29 (close)

London – FTSE 100 < DOWN 0.34% at 7,350.49 (0935 GMT)

New York – Dow > UP 3.70% at 33,715.37 (Thursday close)

Reuters with additional editing by Sean O’Meara

US Inflation Eases, Federal Reserve Seen Slowing Rate Hikes

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.