Asia shares rally after China pledges economic support steps

SINGAPORE  – Asian shares jumped on Tuesday as China’s pledge to step up policy support for its stuttering economy soothed sentiment and lifted beaten down Hong Kong and Chinese stocks, while the dollar eased ahead of the Federal Reserve meeting this week.

MSCI’s broadest index of Asia-Pacific shares outside Japan was 1.2 percent higher and on course to snap a six-day losing streak. Japan’s Nikkei fell 0.22 percent.

The Shanghai Composite Index was 1.55 percent higher, while Hong Kong’s benchmark Hang Seng Index surged 3.4 percent after China’s top leaders pledged on Monday to step up policy support for the economy amid a tortuous post-COVID recovery, focusing on boosting domestic demand and signaling more stimulus steps.

Saxo Markets strategists said the meeting readout reflected a cautious approach to economic stimulus with limited commitments, pointing to explicit recognition of the challenges faced by the economy as a mildly bullish sign.

China’s property market remains a cause for concern among investors, with stocks and bonds in China’s real estate industry sliding to around eight-month lows on Monday amid fears of a cash crunch at two of the country’s biggest developers.

China will adjust and optimize property policies in a timely manner, in response to “significant changes” in the supply and demand relationship in the property market, state news agency Xinhua said late on Monday.

Erin Xin, economist for Greater China at HSBC, said the readout could suggest further tweaking of property policies as well as a more supportive tone for the sector.

“We believe policymakers may remain cautious about financial risks, though they may provide further policy support to help stabilize the sector.”

An index of mainland developers jumped 10.5 percent on Tuesday.

In the currency market, the offshore Chinese yuan strengthened 0.4 percent to 7.1573 per dollar.

The dollar index, which measures the U.S. currency against six major rivals, eased 0.108 percent, while the Japanese yen added 0.07 percent to 141.36 per dollar.

The euro was up 0.11 percent to $1.1074, having hit a two-week low of $1.1059 earlier in the session after a survey on Monday showed euro zone business activity shrank much more than expected in July, reigniting recession worries.

Markets anticipate the European Central Bank (ECB) to hike interest rates by 25 basis points on Thursday but what happens after that remains to be seen.

Over in the United States, business activity slowed to a five-month low in July, dragged down by decelerating service-sector growth, according to a closely watched survey on Monday.

The slowdown may be viewed positively at the Fed, which is keen to see activity cool to lower inflation.

The policymakers are widely expected to raise interest by 25 basis point on Wednesday, with investors and economists expecting that hike to be the last in the Fed’s current tightening cycle.

In the energy market, U.S. crude rose 0.17 percent to $78.87 per barrel and Brent was at $82.84, up 0.12 percent on the day.

Spot gold added 0.4 percent to $1,961.43 an ounce.

U.S. wheat futures hit a five-month high on Tuesday, stretching gains following Russia’s attacks on Ukrainian ports and grain infrastructure that sparked concerns about long-term global supplies and food security.

Read Next

Don’t miss out on the latest news and information.

For feedback, complaints, or inquiries, contact us.