Hang Seng, Nikkei Lead Asian Stocks Higher on Soft US Inflation

Asian shares jumped on Wednesday, with the Hang Seng Index and Nikkei leading the charge as traders and investors cheered positive news from the US and warmer investor sentiment in China.

Cooling inflation data out of Washington was celebrated across regional markets, as it could bring an end to the US Federal Reserve’s long-running rate hikes.

Hong Kong’s Hang Seng Index jumped 3.9%, marking its best day in nearly four months, with tech and property firms leading the gains. On the mainland, China’s blue-chip CSI 300 Index rose 0.7%, while the Shanghai Composite Index advanced 0.6%.

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Positive news lifts China property shares

Investor sentiment was boosted by positive news at home, including a potential $137 billion funding for the property market, improved October retail sales, and President Xi Jinping’s visit to the US.

A report that China plans to provide some of its recent 1-trillion-yuan ($137 billion) bond issuance for low-cost funds for its urban village renovation and affordable housing saw Hong Kong-listed Chinese property stocks soar by over 5%.

The reported fund injection will add to the long list of piecemeal measures announced by China to support its economy and financial markets, Chetan Seth, Asia-Pacific equity strategist at Nomura, said in a note.

“We continue to see value in HK/China stocks and favour cyclical recovery plays that are beaten down on valuations, and possess relatively better fundamentals,” he said.

Economic activities also showed signs of improvement, with October industrial output rising at a faster pace and retail sales growth beating expectations, according to official data.

Retail sales rose 7.6% last month, quickening from a 5.5% gain in September and hitting the fastest growth since May.

Meanwhile, China’s central bank ramped up liquidity injection by pumping a net 600 billion yuan into the banking system on Wednesday.

The yuan traded near its firmest level against the dollar in more than two-months on Wednesday on the back of better onshore and offshore investor sentiment.

Nikkei jumps 2.5% on strong earnings, dovish Fed

Japan’s Nikkei share average also jumped on Wednesday, topping the 33,000 psychological level for the first time in nearly two months, on strong corporate earnings and bets for a more dovish US Fed.

The Nikkei finished the day up 2.5% at 33,519.70. The broader Topix added 1.19%, with an index of growth shares climbing 1.94% to handily outpace a 0.47% gain for value stocks.

Overnight, Wall Street’s big three indexes all posted robust gains, led by the tech-heavy Nasdaq’s 2.1% rally. The Philadelphia SE semiconductor index surged 3.6%.

For the Nikkei, “the ceiling that had been in place around the upper 32,000-level completely gave way after the US CPI, which I think is a very big development for the market,” said Kazuo Kamitani, an equity strategist at Nomura Securities.

“Buying is concentrated around companies that posted favourable earnings,” he added. But with the earnings season now over in both Japan and the US, the market’s focus will be squarely on the outlook for monetary policy, Kamitani said.

Refiner Idemitsu Kosan was the Nikkei’s top percentage gainer, surging 18% after raising its profit forecast and announcing a share split.

Chip-related shares outperformed, with chip-testing equipment maker Advantest jumping 7.5% and chip machinery maker Tokyo Electron up 3.8%. Other winners included startup investor SoftBank Group and Sony, which rose around 5% each.

Korean shares up 2%

Broader Asia-Pacific shares outside Japan also picked up. South Korean shares rose, with the won strengthening, while the benchmark bond yield fell.

The benchmark KOSPI rose 48.93 points, or 2%, to 2,482.18. Among index heavyweights, chipmaker Samsung Electronics rose 1.55% and peer SK Hynix gained 3%, while battery maker LG Energy Solution climbed nearly 3%.

South Korea’s unemployment rate for October inched down to 2.5%. Hyundai Motor jumped 4% and sister automaker Kia Corp gained 4.6%, while search engine Naver and instant messenger Kakao were up 3.2% and 4.2%, respectively.

In Thailand stocks rose as much as 2% to hit their highest since November 8.

Aussie shares hit 2-month high

Australian shares surged to a two-month high on softer-than-expected US inflation and positive economic data from China.

The benchmark index S&P/ASX 200 closed 1.4% higher at 7,105.900, its highest close since September 20.

“The Reserve Bank of Australia (RBA) is a little further behind on the interest rate curve as well as in terms of where the inflation rate currently stands with regards to the Federal Open Market Committee,” said Tim Waterer, chief market analyst at KCM Trade.

“So, while its encouraging to see that the Fed are slowly getting a handle on inflation, the RBA still has further to go with respect to getting CPI back to the 2% target,” Waterer added.

Investor confidence was further boosted by strong economic data from China, Australia’s top trading partner, as well as a persistent dovish central bank.

Australian wages posted the largest increase on record last quarter on a sharp rise in minimum wages. But ANZ analysts expect the RBA to hold the key cash rate at 4.35% on December 5.

The heavyweight mining index surged 2.4% to clock its best day in two months. BHP Group, Rio Tinto , and Fortescue rose between 1.8% and 3.5% on boosts to iron ore prices from the China data.

Indian main benchmarks near one-month highs

India’s main indexes advanced to near one-month highs, with the NSE Nifty 50 index 1.2% higher at 19,675.45, while the S&P BSE Sensex rose 1.14% to 65,675.93.

The Nifty 50 logged its best single day gain since March 31 and closed at the highest level since October 18.

All 13 major sectors logged gains. High weightage financials added 0.92%. Information technology (IT) stocks jumped 2.6%. Tech Mahindra and Infosys were among the Nifty 50 gainers.

The surge in IT companies, which earn the bulk of their revenue from the U.S., came after the soft US consumer inflation data in October.

Another boost came from index provider MSCI raising India’s weightage in its Global Standard (Emerging Markets) index to 16.3% from 15.9% on Tuesday, a move likely to increase the flow of foreign funds after a two-year lull.

Asian currencies advance

The US inflation data also gave some relief to Asian currencies, most of which advanced.

The Indonesian rupiah rose as much as 1.5% to hit its highest level since September 29, while the Malaysian ringgit gained 1.3% to touch a level unseen since November 7. The Taiwan dollar firmed 0.7% to its highest level since October 11.

“Whispers of more support measures for the housing market in China also likely buoyed sentiment in the region,” said Fiona Lim, a senior FX strategist at Maybank, Global Markets Singapore.

Lim said China data was a mixed bag and the country’s recovery is still too fragile to have a lasting boost for Asian currencies and would require evidence of a stabilisation in the property market there at the very least.

Bonds in the region also advanced, with Indonesia’s 10-year benchmark bond yields falling 10.9 basis points to 6.83%, while those in India dropped 5.7 basis points to 7.226%.