China Stocks Rebound on Stimulus But All Eyes on US Fed

Hong Kong’s benchmark Hang Seng index posted its biggest jump in nearly four months in a shortened trading session on Thursday, while China shares also rose, buoyed by Beijing’s fresh economic stimulus measures and a pause in the yuan’s slide.

The Hang Seng index rose 3.6% to close at 19,968.38 in the afternoon, posting its biggest gain since late April. The morning trading was suspended due to a typhoon.

The blue chip CSI300 Index rose 0.8% to 4,116.24, while the Shanghai Composite Index gained about 1% to 3,246.25.

Sentiment was boosted after China’s State Council, or cabinet, announced fresh steps to support an economy suffering from a property crisis, Covid-19 outbreaks, and heatwaves.

Fresh stimulus measures include a new quota of 300 billion yuan ($43.8 billion) in policy bank financing tools, and a fresh quota of about 500 billion yuan in local government special bonds, state media reported late on Wednesday.

Also, China’s Ministry of Human Resources and Social Security said on Thursday the country will focus on expanding jobs and promote fiscal, monetary and industrial policies to support job market stabilisation.

The yuan rebounded from a two-year low against the dollar, helped by a firmer-than-expected official guidance.

Sources said on Wednesday that China’s foreign exchange regulator phoned several banks to warn them against aggressively selling the Chinese currency.

The recent weakness in stocks “released selling pressure, creating room for a rebound that was triggered by news of fresh stimulus,” Linus Yip, Hong Kong-based chief strategist at First Shanghai Securities, said.

Hong Kong’s Hang Seng Tech Index surged 6%, the biggest one-day percentage gain in nearly four months, amid market gossip that Sino-US audit talks have made progress.

In China, financials and property shares rose, but Shenzhen’s start-up board ChiNext and Shanghai’s tech-heavy STAR Market fell.

Energy companies jumped 5.2%, but new energy shares dropped nearly 2%.

Nomura, however, cautioned that the new stimulus measures are not game changers, as the zero-Covid policy and property woes continue to weigh on the economy.

PetroChina 55% Profit Jump

PetroChina reported on Thursday a 55% jump in profit during the first half of 2022, boosted by an increase of its oil and gas output and higher energy prices, as Western sanctions on Russia intensified tight supply worries.

China National Petroleum Corp (CNPC), the listed firm of Asia’s top oil and gas producer, reported an interim profit of 82.39 billion yuan ($12 billion), compared with 53 billion yuan a year ago, according to a statement filed to the Shanghai Stock Exchange.

PetroChina also disclosed a 3% increase in oil and gas output to 845 million barrels of oil equivalent, in response to Beijing’s order to enhance domestic energy supply amid an increasingly complex geopolitical environment.

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Foreigners Buying Japanese Stocks

In Tokyo, foreigners continued purchases of Japanese stocks for a third consecutive week in the week to August 19 as upbeat domestic corporate earnings and a rally in Wall Street’s major indexes boosted sentiment further.

Overseas investors bought Japanese stocks worth a net 404 billion yen (nearly $3 billion) last week, marking their biggest weekly purchase since July 22, data from exchanges showed.

Investors scooped up a fresh batch of domestic firms last week, lured by their strong quarterly results. Discount store operator Pan Pacific International Holdings surged 12.7% last week, while Sundrug added nearly 10%.

The Nikkei share average and the Topix index rose over 1% each last week, in their third weekly gain in a row. The Nikkei also hit an over seven-month high in that week.

But both indexes are set for a weekly loss this week as investors are cautiously awaiting for clues on the size of US rate hikes from the US Federal Reserve’s annual Jackson Hole conference, due to start on Thursday.

The MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.7%, after US stocks ended the previous session with modest gains.

Australian Stocks Edge Up

Australian shares ended higher on Thursday, driven by broad-based gains across sectors and in tandem with global sentiment, as focus shifts to the US Fed’s comments later tonight Asian time.

The S&P/ASX 200 index ended 0.7% higher at 7048.1 points at the close of trade. The benchmark rose 0.5% on Wednesday.

“Overall macro picture remains heavy on the Jackson Hole symposium, as the market watches for commentary from US Federal Reserve chair Powell and any hints on the overall Fed rhetoric for the next rate hike,” Azeem Sheriff, market analyst at CMC Markets, said.

Miners and mining sub-index rose 0.7%, adding gains for the third straight session, with sector giants BHP Group, Rio Tinto and Fortescue Metals Group climbing between 0.1% and 0.7%.

Airliner Qantas Airways added over 7%, after it said it will buy back up to A$400 million ($279 million) of shares as travel demand rebounds.

Indian Shares End Down

Indian shares reversed course to close lower, dragged down by tech and the expiry of monthly derivative contracts, while investors waited for clues on future rate hikes in the US.

The NSE Nifty 50 index was 0.47% lower at 17,522.45, after rising as much as 0.7% in the session. The S&P BSE Sensex fell 0.53% to 59,774.72.

“Amid heightened volatility, investors pruned their long positions on the F&O expiry day due to the uncertain global economic scenario,” said Shrikant Chouhan, head of equity research for retail at Kotak Securities.

Adani Ports and Special Economic Zone was the top loser on the Nifty 50 after it fell 2.4%.

In the currency markets, the dollar was down almost 0.5% including 0.4% against the euro and 0.5% against the yen to 136.62 .

Commodity bulls saw Brent crude climb back up to $101.83 per barrel and Europe’s benchmark gas price jumped to another record high of 313.50 euros per megawatt hour. They are now up 640% over the last year.

Deutsche Bank strategist Jim Reid said the worry was that the energy situation in Europe keeps getting worse.

“That’s adding to fears that “peak inflation” might not actually have arrived yet for some countries,” he said. “Policymakers are about to face some unenviable choices as they grapple with the worst stagflation we’ve seen in decades.”