Most shares in Asia rallied after Chinese authorities unleashed their latest round of easing measures, although Hong Kong and Australia gave up earlier gains, amid lingering worries over China’s slowing growth.
The Nikkei 225 index kept its win streak going, gaining 121.82 points, or 0.7%, to 18,947.12
In Hong Kong, the Hang Seng slid 35.69 points, or 0.2%, to 23,116.25
Meanwhile, brokerage firms rallied with Haitong Securities Co. up 2.8% in Hong Kong.
Shares in Asia have been rallying since the summer on bets of easy money policies from global central banks and are already back to levels they reached before China’s devaluation of its currency sparked a global selloff in August. On Thursday, European Central Bank chief Mario Draghi signaled the ECB could do more to stoke growth and inflation in the eurozone as early as December, sending stocks higher around the world.
Meanwhile, patchy U.S. economic data has deferred expectations for a rise in interest rates for the rest of 2015. Grim industrial production and export data in Japan have lifted hopes its central bank will introduce more stimulus measures at its policy meeting this week.
The Australian dollar soared to as high as $0.7296 U.S. late Friday immediately following China’s announcement. It was last up 0.6% in early Asia trade at $0.7255.
The U.S. dollar was last down 0.4% against the Japanese yen at 120.95 yen. Still, it reached as high as 121.51 yen earlier Monday, marking its strongest level against the Japanese currency since late August.
CHINA
The CSI 300 in Shanghai picked up 18.02 points, or 0.5%, to 3,589.26
China’s recent rate cuts haven’t always produced a pop in equities immediately after their announcements. The Shanghai benchmark fell in the single trading session after three of the last four rate cuts before Friday’s.
Still, the lead up to China’s Friday announcement—hopes of more easing world-wide—combined with a longer stretch of cheap borrowing in the U.S. has lifted most shares in the region to their highest levels since August. The MSCI Asia Pacific Index is on track for its best month since April 2009, up 8.9% month-to-date through Friday’s close in local-currency terms.
The gains Monday came after China’s central bank combined a quarter-point cut in benchmark interest rates with a half-percentage reduction in banks’ reserve-requirement ratio, all in a bid to lower corporate financing costs and pump liquidity into the economy. The bank announced the measures late Friday.
China also removed caps on deposit rates, a move designed to foster more competition and allow banks to set rates more freely. The measure could hurt banks’ profitability, and shares of several big state-owned banks fell on Monday in Hong Kong, including Agricultural
Bank of China Ltd. and Bank of China Ltd., off 0.6% and 0.5%, respectively.
But most banks’ funding liabilities were already reflected in market pricing, and an improvement of interbank liquidity would lower financing costs, Goldman Sachs Group Inc. said in a note.
Daily trading volumes for A shares, or yuan-denominated domestic stocks, were up at 1.11 trillion yuan ($174.3 billion U.S.) on Monday, compared with a recent 370.7 billion yuan low on Sept. 30. They remain down 53% from a record on 2.36 trillion yuan reached on May 28, just before stocks sold off during the summer.
Margin loans rose to more than 1 trillion yuan last week, up as much as 11% from a recent low of 906.7 billion yuan on Sept. 30, according to the latest data from Wind Information Co.
Loans are still down 56% from a record 2.3 trillion yuan in June. Borrowing to buy shares magnified gains during a yearlong rally through June and losses when investors rushed to cover their positions.
A four-day meeting of China’s Communist Party also kicks off Monday, during which leaders are expected to approve an economic blueprint for scaling back the role of the state over the next five years.
China’s cut to interest rates is the sixth such measure since last November, while its cut to reserve requirement ratios was the fourth such move this year. The easing came after China reported that its third-quarter growth slowed to 6.9% year over year, marking the slowest rate of expansion since the beginning of 2009.
Yields on Chinese government bonds fell, with returns on five-year bonds below 2.9%, the lowest in three years. Returns on 10-year bonds were down to 3.07%, the lowest since 2009.
In other markets
Markets in New Zealand were shuttered for the Labour Day holiday
The Kospi index in Korea inched up 7.68 points, or 0.4%, to 2,048.08
Taiwan’s Taiex index moved higher 71.55 points, or 0.8%, to 8,645.36
In Singapore, the Straits Times Index gained 14.61 points, or 0.5%, to 3,083.07
The ASX 200 Index lost 3.57 points, or 0.1%, to 5,347.99
