Asian stock markets largely experienced gains following China’s central bank’s announcement of new measures to bolster the stock market through share repurchases by companies and major shareholders.
The Chinese economy showed signs of slowing in the last quarter, with the latest data indicating a 4.6% annual growth rate for July to September, down from 4.7% in the previous quarter. Overall growth for 2024 has averaged 4.8%, which falls short of the government’s target of around 5%. The ongoing weakness in the property sector continues to exert pressure on demand.
In a move to stabilize the struggling stock market, the People’s Bank of China (PBOC) issued guidelines allowing state banks to extend loans for stock repurchases. These loans, available only from 21 designated financial institutions, will carry a maximum interest rate of 2.25%. The central bank emphasized its commitment to strict oversight of this initiative aimed at revitalizing China’s equity markets, which have faced challenges in recent years.
The announcement sparked a rally in Shanghai, where the Composite Index rose by 2.1% to close at 3,232.14. The Shenzhen benchmark also saw a notable increase of 3.2%. Over the past three months, Shanghai’s index has gained 9%, although it previously surged following the introduction of measures aimed at counteracting the economic slowdown before investors expressed disappointment over the lack of significant government spending initiatives.
Hong Kong’s Hang Seng Index rose 2.2% to reach 20,519.78. Additionally, state-run banks in China announced reductions in deposit rates, lowering demand deposit rates from 0.15% to 0.1% and longer-term deposit rates from 1.35% to 1.1%.
In other Asian markets, Tokyo’s Nikkei 225 climbed 0.2% to 38,798.48, while Seoul’s Kospi declined by 0.6% to 2,594.40. Australia’s S&P/ASX 200 fell 0.9% to 8,283.20. Taiwan’s Taiex rose 1.9%, and Thailand’s SET index increased by 0.2%, while India’s Sensex dipped by 0.2%.
In the U.S., stocks continued to hover near record highs, buoyed by positive economic indicators. The S&P 500 ended nearly unchanged at 5,841.47, while the Dow Jones Industrial Average rose 0.4% to 43,239.05, surpassing its previous record. The Nasdaq Composite gained slightly, finishing at 18,373.61.
Strong performance from the chip industry, particularly after Taiwan Semiconductor Manufacturing Co. reported better-than-expected profits, contributed to market optimism. However, stocks like Google’s parent company, Alphabet, which fell 1.4%, and Elevance Health, which tumbled 10.6% after reporting disappointing profits, kept market gains in check. CSX also dropped 6.7% after missing profit expectations and forecasting modest growth for the remainder of the year due to rebuilding efforts following recent hurricanes.
In the bond market, Treasury yields rose in response to encouraging economic reports. U.S. retailers reported higher sales in September compared to August, and fewer Americans applied for unemployment benefits, indicating a stable job market.
These developments raised hopes that the economy could avoid a recession amid persistent inflation, as the Federal Reserve has begun cutting interest rates to sustain economic momentum. Optimists believe this environment could further elevate stock prices, although critics caution that current valuations may appear excessive in light of slower corporate profit growth.
On the European front, the European Central Bank reduced its main interest rate by a quarter percentage point on Thursday, leading to a 1.2% increase in French stock indexes and a 0.8% rise in Germany.
As of early Friday, U.S. benchmark crude oil increased by 25 cents to $70.92 per barrel, while Brent crude rose 20 cents to $74.65 per barrel. The dollar weakened against the yen, falling to 149.85 from 150.21, and the euro gained ground, rising to $1.0843 from $1.0827.
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