Shares across Asia experienced a significant rally on Thursday, driven by reports of China’s intention to invest billions into state-run banks to bolster their capital. The Chinese government is set to inject 1 trillion yuan ($142 billion) into these financial institutions. Li Yunze, head of the National Financial Regulatory Commission, confirmed that capital increases would be implemented at six major banks, although specific financial details were not disclosed.
Li emphasized the need to enhance banks’ capital due to shrinking profit margins and interest income, stating, “It is necessary to coordinate various channels such as internal and external channels to replenish capital.” Additionally, the government announced a “living allowance,” or cash handouts, aimed at supporting low-income families ahead of next week’s National Day holidays, a move that seeks to stimulate consumer spending.
In recent days, Beijing also unveiled several measures designed to revitalize the struggling property sector, including reduced interest rates and lowered down payment requirements for certain mortgages. The ongoing defaults by real estate developers continue to pose challenges for the banking sector.
The Hang Seng Index in Hong Kong surged by 3.5% to reach 19,794.33, while the Shanghai Composite Index climbed 3.3% to 2,993.46. Japan’s Nikkei advanced 2.8% to 38,925.63, and South Korea’s Kospi rose 2.9% to 2,671.57, spurred by semiconductor giant SK Hynix’s announcement of a new AI memory chip, which boosted its shares by 9.4%. Australia’s S&P/ASX 200 added 1% to 8,203.70.
Despite a stumble on Wall Street the previous day, Asian markets rallied, reflecting renewed optimism regarding China’s stimulus efforts. Stephen Innes from SPI Asset Management noted, “It seems like China hasn’t run out of kitchen sinks just yet.”
In the U.S., the S&P 500 slipped 0.2% to 5,722.26 following an all-time high, while the Dow Jones Industrial Average fell 0.7% to 41,914.75 after setting its own record. The Nasdaq composite saw a slight increase, edging up less than 0.1% to 18,082.21.
Bond market activity indicated rising Treasury yields after a recent decline, amidst concerns over consumer confidence, which suffered its worst drop in three years. This decline heightened expectations for the Federal Reserve to implement a substantial interest rate cut in its upcoming meeting.
As investors keep an eye on the U.S. job market update next week, concerns linger over slowing hiring, despite relatively low layoff rates. The Fed has maintained a high interest rate to combat inflation but recently shifted focus towards protecting job growth with a notable half-percentage point cut.
In corporate news, Trump Media & Technology Group saw a 10.5% increase, marking its first consecutive gain in two weeks amid speculation about former President Donald Trump’s stock holdings in the company.
In commodities, benchmark U.S. crude oil fell $1.61 to $68.08 per barrel, while Brent crude dropped $1.63 to $71.27 per barrel. The U.S. dollar slightly decreased against the Japanese yen, trading at 144.75, while the euro rose to $1.1158.
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