Asian Stocks Rally Extends on Tech, China Stimulus: Markets Wrap

By Pune Media On Sep 26, 2024 30

(Bloomberg) — Asian equities rallied Thursday as fresh signs of vigor in technology stocks spread across the region. The yen struggled for traction against the dollar.

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Equity benchmarks in the tech-heavy markets of Japan and South Korea advanced alongside futures for the Nasdaq 100. The gains were partly driven by an after-hours rally in Micron Technology Inc., a Nasdaq 100 constituent, following a strong revenue forecast. Futures for the S&P 500 also rose.

Asian tech stocks outperformed as a gauge of the region’s equities rekindled a rally from earlier in the week to trade at the highest level in nearly three years. The benchmark CSI 300 index gained for a seventh straight session after the government rolled out more stimulus to help the economy, including cash handouts. A gauge of Chinese stocks in Hong Kong rose for a 10th consecutive day, the longest winning streak in more than six years.

Asian equities have soared this week after the People’s Bank of China came out with a slew of measures to revive the world’s second-largest economy. Still, some analysts have questioned whether the rally is sustainable amid concerns over deflation and a revival of consumption. The Golden Dragon index of US-listed Chinese stocks fell on Wednesday, which may be a sign of fatigue for the rally.

“Asian markets are soaking in an ocean of optimism, thanks to China’s unusual and all-in determination to gear up momentum into the Golden Week and the year-end,” said Hebe Chen, an analyst at IG Markets Ltd. “The region broadly built up the risk-on sentiment following Fed’s rate cut last week.” China’s Golden Week holidays run from Oct. 1-7.

As part of the stimulus, China is considering injecting up to 1 trillion yuan ($142 billion) of capital into its biggest state banks to increase their capacity to support the struggling economy, Bloomberg reported Thursday, citing people familiar with the matter. Such a move would be the first time since the global financial crisis in 2008 that Beijing has injected capital into its big banks.

“This is a different type of stimulus,” said Hao Hong, chief economist at Grow Investment Group. “If done through special bond issuance, it’s a fiscal stimulus and can stabilize the banks as property prices continue to decline. It will ensure that the banks lending capability won’t be affected.”

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Treasury yields were steady after rising across the curve on Wednesday, supporting gains in the dollar, as investors faced an onslaught of new bond supply from an auction of five-year notes. An index of greenback fell after a 0.7% increase Wednesday.

The yen traded at around 145 per dollar after a Wednesday decline against the greenback of more than 1%. Softness in the Japanese currency comes amid signs the Bank of Japan is in no rush to further increase interest rates.

China Stimulus

With China’s central bank recently surprising the market with its broad package of monetary stimulus steps, more fiscal measures may come in the next few days as President Xi Jinping’s 24-member Politburo is set to meet ahead of the weeklong holiday.

In a rare announcement of direct aid, coming just a day after unveiling a sweeping program to stimulate the world’s second-largest economy, authorities said they will give one-off cash handouts to people in extreme poverty, the state broadcaster CCTV reported Wednesday, without providing details.

The cash handout announcement has made investors “wondering whether this will signal a new urgency in Beijing for more direct stimulus, especially in consumption related,” said Wong Kok Hoong, the head of institutional equities sales trading at Maybank Securities Pte. “Personally, I would suggest adding to positions, especially index tracking large-caps: the internet names, tech, and insurance. The rally would probably be broad-based, given how underweight HK/China has been.”

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Elsewhere in Asia, data set for release includes industrial production in Singapore, machine tool orders in Japan and Hong Kong trade data.

On Wednesday, Federal Reserve Governor Adriana Kugler said she “strongly supported” the US central bank’s decision last week, adding it will be appropriate to make additional rate cuts if inflation continues to ease as expected.

Going forward, the Fed’s level of success in guiding the US to a soft landing will be important in determining the outlook for other asset classes, said UBS Group AG’s Solita Marcelli.

“The market has been overestimating Fed easing for the last three years and I think probably continues to do so,” said Michael Rosen, chief investment officer at Angeles Investments. “But what’s changed a bit with the 50 basis point move was a willingness by the Fed to move faster, to be more accommodative, to be more receptive to economic conditions, as opposed to just focusing on inflation.”

In commodities, oil was steady after plunging in the previous trading session. West Texas Intermediate, the US oil price, slipped more than 2% on Wednesday to settle below $70 a barrel. Elsewhere, gold traded steady near an all-time high as the weak US data bolstered the case for deeper interest rate cuts.

Key events this week:

ECB President Christine Lagarde speaks, Thursday
US jobless claims, durable goods, revised GDP, Thursday
Fed Chair Jerome Powell gives pre-recorded remarks to the 10th annual US Treasury Market Conference, Thursday
China industrial profits, Friday
Eurozone consumer confidence, Friday
US PCE, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures rose 0.5% as of 1:36 p.m. Tokyo time
Nikkei 225 futures (OSE) rose 2.3%
Japan’s Topix rose 1.9%
Australia’s S&P/ASX 200 rose 0.9%
Hong Kong’s Hang Seng rose 2.3%
The Shanghai Composite rose 0.6%
Euro Stoxx 50 futures rose 0.6%
Nasdaq 100 futures rose 0.9%

Currencies

The Bloomberg Dollar Spot Index fell 0.2%
The euro was little changed at $1.1143
The Japanese yen was unchanged at 144.75 per dollar
The offshore yuan rose 0.2% to 7.0139 per dollar
The Australian dollar rose 0.4% to $0.6848

Cryptocurrencies

Bitcoin fell 0.2% to $63,376.53
Ether rose 0.7% to $2,597.65

Bonds

The yield on 10-year Treasuries was little changed at 3.78%
Japan’s 10-year yield advanced 1.5 basis points to 0.825%
Australia’s 10-year yield advanced four basis points to 3.95%

Commodities

West Texas Intermediate crude fell 0.3% to $69.50 a barrel
Spot gold rose 0.2% to $2,661.58 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Winnie Hsu.