Investors reacted positively to China’s commitment to providing more support for its struggling economy, leading to a rise in Asian shares and the yuan. Hong Kong’s property sector saw the most significant buying activity, while the dollar weakened against major rivals.
After six consecutive days of losses, MSCI’s broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) gained 1.5%. However, Japan’s Nikkei (N225) fell by 0.4%.
In China, the Shanghai Composite Index (SSEC) rose by 1.9%, and the Hang Seng (HSI) surged by 3%, with property stocks rebounding from previous declines caused by concerns over debt repayment.
Country Garden (2007.HK) experienced a 14% jump and became the most traded stock in Hong Kong. Its onshore-traded debt also recovered to less distressed levels. Additionally, shares in its services arm (6098.HK) and rival Longfor (0960.HK) rose by over 20%.
China’s top leaders pledged to provide more assistance to the economy and indicated further support for the property industry. Analysts from Citi noted that the commitment to “adjust and optimize property policies” could lead to additional property easing measures, allowing the Chinese economy to navigate the second half of the year.
Mainland developers (HSMPI) saw an 11% surge, marking their best day in eight months.
The Chinese yuan strengthened by approximately 0.5% to 7.1526 per dollar, supported by state banks selling dollars both onshore and offshore. Consequently, the dollar index, which measures the U.S. currency against six major rivals, decreased by 0.1% to 101.31.
Other currency pairs also followed suit, with the China-sensitive Australian dollar rising by 0.4% to $0.6767, and the kiwi increasing by 0.2% to $0.6215.
Upcoming events include a significant earnings session, the release of the euro zone bank lending survey, and the Federal Reserve’s meeting on Wednesday. Companies such as Unilever (ULVR.L), LVMH, EssilorLuxottica (ESLX.PA), Microsoft (MSFT.O), Google parent Alphabet (GOOGL.O), Visa (V.N), General Electric (GE.N), and chipmaker Texas Instruments (TXN.O) will be closely watched.
While markets anticipate 25-basis-point rate hikes from both the Fed and the European Central Bank, pricing diverges from policymakers’ rhetoric, making the tone and outlook of these institutions crucial.
The euro recovered from a two-week low after a survey revealed a more significant contraction in European business activity than expected, raising concerns about a potential recession. It was last valued at $1.1070.
The Japanese yen slightly strengthened by 0.07% to 141.39 per dollar. Investors remain uncertain about whether the Bank of Japan will adjust its stance on maintaining government bond yields near zero during its policy-setting meeting on Friday.
In the energy market, U.S. crude rose by 0.3% to $78.98 per barrel, while Brent increased by the same percentage to $82.96.
Spot gold also experienced a 0.3% rise, reaching $1,961 per ounce.
U.S. wheat futures reached a five-month high due to concerns about long-term global supplies and food security following Russia’s attacks on Ukrainian ports and grain infrastructure.
The article was written by Ankur Banerjee and edited by Shri Navaratnam. The Thomson RushHourDaily Trust Principles apply.
