Hong Kong and Shanghai gained for a third consecutive day on hopes Beijing will put in place more help for the slowing economy after Wednesday’s decision to reduce the portion of cash banks must keep in reserve, a move aimed at freeing them up to lend more
Shanghai and Hong Kong stocks built on their recent rally Thursday as traders awaited new pledges of stimulus from Chinese officials a day after they announced a measure to boost bank lending, though other Asia markets wavered.
Another record close for the S&P 500 on Wall Street provided a positive lead for investors, while a slew of data including on US economic growth and jobs could give some idea about the Fed’s plans for interest rates.
Hong Kong and Shanghai gained for a third consecutive day on hopes Beijing will put in place more help for the slowing economy after Wednesday’s decision to reduce the portion of cash banks must keep in reserve, a move aimed at freeing them up to lend more.
The 50 bps cut to the reserve requirement ratio (RRR) was the first since September and twice as big as usual, which analysts said showed officials were getting increasingly concerned about the economic outlook.
Authorities also said they would reveal more support policies soon.
The reduction added to an upbeat mood in the two cities that came on the back of reports that Alibaba co-founders Jack Ma and Joseph Tsai had bought about $200 million worth of shares in the company in a signal of their confidence in the ecommerce titan.
Equities climbed more than 1% in Shanghai, while Hong Kong was also higher, having piled on nearly 6% in the earlier two sessions.
China is still worth watching given the valuations have come down so far, JPMorgan Asset Management’s Kerry Craig told Bloomberg Television.
There could be a near-term rally if we do see further policy announcements coming through, Craig added.
Nevertheless, there were warnings that the government needed to do a lot more to restore confidence in the world’s number two economy, which has been hit by a debt crisis in the vast property sector and weak overseas demand for its goods.
While the RRR cut sparked an impressive rally, markets will struggle to go higher as investors have their focus back to the economic fundamentals and uncertainties ahead of crucial political meetings in the coming two months, said Redmond Wong at Saxo.
And National Australia Bank’s Rodrigo Catril said that it was “hard to see how a modest decline in borrowing rates will trigger a boost in credit demand”.
Beijing still needs to address structural issues, especially within the property sector, while more support is needed for the consumer to boost economic momentum, Catril added.
In other markets, Sydney, Wellington, Taipei and Jakarta gained.
However, Tokyo suffered another loss, coming down from three-decade highs as bets on a hawkish pivot by the BoJ pushed the yen up, which is bad for exporters.
Singapore, Seoul and Manila also dropped.
