**Hong Kong (AFP)** – Hong Kong and Shanghai shares soared again Friday on hopes that China will unveil more measures to boost its economy, while the yen rallied after Japan’s ruling party elected a new leader who supports interest rate hikes. A string of announcements this week has seen leaders cut interest rates, pledge support to the beleaguered property sector, free up banks to lend more, and pledge to boost jobs, particularly for the poor.
While analysts have warned that the measures—the boldest in years—will not on their own be enough to get the economy back on track, they have provided some much-needed cheer to investors and raised hopes that the government is listening to calls for major help. These developments come amid a more upbeat mood on trading floors after the Federal Reserve’s bumper rate cut last week and indications that more cuts are in the pipeline through to 2026. The bank’s policy outlook will be in focus later Friday with the release of its preferred gauge of inflation.
On Friday, Chinese officials announced they had cut the amount of cash banks must hold in reserve in a bid to encourage lending and revive economic activity—a move that would inject more than $140 billion into financial markets. Meanwhile, a Bloomberg report noted that Beijing is considering pumping a similar amount into the country’s large state-run banks, marking the first such move of support since the global financial crisis.
“Beijing seems finally determined to roll out its bazooka stimulus in rapid succession,” said Nomura chief China economist Ting Lu. “Beijing’s recognition of the severe situation of the economy and lack of success in a piecemeal approach should be valued by markets,” he stated in a note.
Hong Kong saw gains of more than three percent in opening trades before paring the increases, while Shanghai also rose nearly as much—both markets are now more than 10 percent up from Friday’s close. This performance marks Hong Kong’s best week since 2009 and Shanghai’s best since 2008, according to Bloomberg data. Property stocks continued to perform well in Hong Kong, with previously beaten-down developers experiencing a resurgence in interest. Kaisa surged 77 percent, Fantasia rose more than 15 percent, and Sino-Ocean added 11.1 percent.
Harry Murphy Cruise at Moody’s Analytics commented, “The sustainability of these gains will depend on whether the new stimulus will be accompanied by broader structural reforms. Absent concrete policies to expand social safety nets, promote private business investment, and broaden the revenue base of local governments, the spending splurge risks being just a temporary sugar hit. Sure, it’ll help the economy achieve its growth target for the year; but creating a sustainable growth path is what investors want to see. To that end, we expect an acceleration of policy announcements over the remainder of the year.”
Tokyo rallied more than two percent on a falling yen, which hit 146.49 per dollar—its weakest level since the start of September—on bets that nationalist Sanae Takaichi would win the leadership of Japan’s ruling Liberal Democratic Party in the vote. Takaichi has argued that hiking interest rates was a bad idea, citing the benefits of a weaker yen. However, the yen briefly strengthened to around 142.80 after the market closed and the vote, which was ultimately won by former defense minister Shigeru Ishiba, who supports the Bank of Japan’s exit from its longstanding unorthodox monetary easing policies.
Crude prices edged down, extending Thursday’s losses driven by expectations of increased output from Libya, offsetting renewed hopes for China’s economic recovery and concerns about the crisis in the oil-rich Middle East. Sydney also experienced gains, but Wellington, Taipei, Bangkok, Singapore, Seoul, Manila, Mumbai, and Jakarta all fell. London, Paris, and Frankfurt remained on the front foot.
**Key figures around 0810 GMT**
Tokyo – Nikkei 225: UP 2.3 percent at 38,829.56 (close)
Hong Kong – Hang Seng Index: UP 3.6 percent at 20,632.30 (close)
Shanghai – Composite: UP 2.9 percent at 3,087.53 (close)
London – FTSE 100: UP 0.2 percent at 8,297.67
– Dollar/yen: DOWN at 143.20 yen from 144.87 yen on Thursday
– Euro/dollar: DOWN at $1.1137 from $1.1174
– Pound/dollar: DOWN at $1.3364 from $1.3412
– Euro/pound: DOWN at 83.29 pence from 83.31 pence
– West Texas Intermediate: DOWN 0.2 percent at $67.51 per barrel
– Brent North Sea Crude: DOWN 0.2 percent at $71.48 per barrel
– New York – Dow: UP 0.6 percent at 42,175.11 (close)
© 2024 AFP
