Asian stocks rallied on Tuesday following a charge led by China and Hong Kong after Beijing waded in to support its struggling markets.
A slew of announcements from China’s securities regulator, as well as a reported meeting between President Xi Jinping and financial regulators on Tuesday, highlighted the urgency of Chinese authorities to stem heavy losses in its stock market, which have plumbed multi-year lows in recent days.
The moves come as China’s blue-chip index plunged to a five-year low last week on the back of the country’s ailing economy, which had prompted state-backed investors, dubbed the “national team”, to step up their buying of blue-chip stock tracking index funds to support the market.
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The CSI300 index jumped 3.48% in the wake of Tuesday’s developments, while the Shanghai Composite Index, which bottomed at a five-year trough on Monday, likewise surged 3.23%, or 87.30 points, to 2,789.49.
The Shenzhen Composite Index on China’s second exchange rallied 5.14%, or 73.68 points, to 1,506.79.
Also helping sentiment, China’s securities regulator said it would tighten scrutiny of margin financing, malicious short selling and seek to ward off risks involving pledged shares.
In Hong Kong, tech giants jumped 4.2% to lead the gains, with shares in Alibaba and Meituan up 6.8% and 4.9%, respectively. The Hang Seng Index soared 4.04%, or 626.86 points, to 16,136.87.
Bucking the trend was Japan’s Nikkei share average which fell as investors booked profits on high stock prices and continued to assess domestic earnings reports.
The Nikkei share average was down 0.53%, or 193.50 points, to close at 36,160.66, while the broader Topix fell 0.68%, or 17.46 points, to 2,539.25.
Automaker Toyota Motor was among a host of companies to announce third-quarter earnings on Tuesday as the index heavyweight gave the market a brief boost after announcing it had raised its full-year operating profit forecast.
US Dollar Nears Three-Month High
Elsewhere across the region, there were also gains in Manila, Mumbai, Bangkok and Jakarta but Sydney, Seoul and Singapore fell. The gains hoisted MSCI’s broadest index of Asia-Pacific shares outside Japan up 1.2%.
Stocks in Europe looked set to extend the positive lead in Asia, with Eurostoxx 50 futures up 0.45%. Nasdaq futures edged 0.19% higher, while S&P 500 futures tacked on 0.05%.
In currencies, the Australian dollar jumped after the country’s central bank retained a tightening bias at the conclusion of its policy meeting and warned against imminent rate cuts, joining the Fed chorus of caution.
The dollar hovered near a three-month high against its major peers and last bought 148.39 yen, buoyed by the prospect of higher-for-longer US rates.
Data on Monday showed the US services sector growth picked up in January as new orders increased and employment rebounded, adding to growing doubts about the slew of Fed rate cuts priced in for this year, which had already been dialled back in the wake of Friday’s blockbuster US jobs report.
Oil Prices Remain Steady
Fed expectations remained the main driver of market moves as investors come to terms with the likelihood of US rates staying higher for longer than initially expected.
That kept US Treasury yields elevated, with the two-year yield, which typically reflects near-term interest rate expectations, hovering near Monday’s one-month high. It was last at 4.4306%.
Market pricing shows roughly 115 basis points of easing by the Fed this year, down from over 150 bps at the end of last year. Bets for a March rate cut have also largely been priced out, and investors have lengthened the odds for one in May.
In commodities, oil prices held largely steady as traders took stock of a visit to the Middle East by US Secretary of State Antony Blinken to discuss a ceasefire offer in the region.
US crude rose seven cents to $72.85 a barrel. Brent futures gained eight cents to $78.07.
Key figures
Tokyo – Nikkei 225 < DOWN 0.53% at 36,160.66 (close)
Hong Kong – Hang Seng Index > UP 4.04% at 16,136.87 (close)
Shanghai – Composite > UP 3.23% at 2,789.49 (close)
London – FTSE 100 > UP 0.53% at 7,653.11 (0936 GMT)
New York – Dow < DOWN 0.71% at 38,380.12 (Monday close)
- Reuters with additional editing by Sean O’Meara
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