Stocks across Asia surged higher Monday after Beijing surprised
with an interest-rate cut late last week, with Hong Kong leading
the region on renewed hopes of faster growth in the region's
biggest economy.
Hong Kong's benchmark index, made up mostly of mainland stocks,
soared 2%, while the Shanghai Composite Index opened up 0.8%. The
gains may give a much-needed boost to the trading link between the
two cities that started last week but was met with tepid demand, in
part due to lingering worries over China's sluggish economy.
China's cut in borrowing costs were the first in more than two
years and came after a series of piecemeal easing measures that
failed to encourage banks to lend and companies to borrow more. The
move was announced Friday night after most Asian stock markets were
closed, meaning Monday morning in Asia was the first time they had
a chance to react.
"This provides confidence that [China's] growth won't fall below
7%," said Shane Oliver, head of investment strategy and chief
economist at AMP Capital Investors. "Some of the rally this year
has been a removal of cheap valuations. The next leg of the rally
will probably come from confidence that growth is not going to
collapse." Chinese leaders are targeting economic growth of 7.5%
this year and the Shanghai Composite is up more than 18% year to
date.
Australia joined in the gains Monday, with the S&P/ASX 200
rising 1.1%. The country's miners, which send most of their
commodities to China, led the way. The rally put an end to a
two-week losing streak for the benchmark, placing it back in
positive territory for the year.
BHP Billiton Ltd. and Rio Tinto Ltd. climbed 1.3% and 2.3%,
respectively, while Fortescue Metals Group Ltd. surged 2.3%, as
investors bet looser Chinese monetary policy will stimulate more
demand for commodities like iron ore, used to make steel. China is
Australia's biggest trading partner.
The move also sent Wall Street higher on Friday to close at
fresh records while the Stoxx Europe 600 jumped more than 2%.
Elsewhere, South Korea's Kospi rose 0.9% to 1981.40 while
Japan's markets were closed for a holiday.
Comments by European Central Bank President Mario Draghi that
the central bank was ready to fight low inflation by expanding its
asset buying also lifted markets.
Moves by Europe, Japan and now China "underlines [the]
commitment of global policy makers to head of deflation and support
growth," said AMP's Mr. Oliver.
The Shanghai Composite Index gained 0.3% last week while Hong
Kong fell 2.7%, even as the Shanghai-Hong Kong Connect came online.
The program, which allows investors in the two cities to buy each
other's shares for the first time, has only a fraction of daily
quotas being taken up.
Write to Chao Deng at Chao.Deng@wsj.com
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