Mumbai, 27 Sep (Commoditiescontrol): Chinese stocks are on track for their best weekly performance since 2008, as Beijing introduced a massive stimulus package aimed at revitalizing the economy. The move lifted Asian markets to a 2-1/2-year high, while a significant drop in oil prices contributed to positive disinflationary trends globally.
MSCI's broadest index of Asia-Pacific shares, excluding Japan, rose by 1.1%, reaching its highest level since February 2022, and is poised for a weekly gain of 6%. This surge has been primarily driven by a remarkable rally in Chinese equities. China's blue-chip index jumped another 2.9%, bringing its weekly increase to an impressive 14%, marking the strongest rise since November 2008. Hong Kong’s Hang Seng index followed suit, surging 2.7% on Friday and up 12% for the week, its best performance since 2009.
Beijing has demonstrated its commitment to economic recovery by swiftly rolling out stimulus measures. According to Nomura’s chief China economist, the swift and substantial approach signals a shift in Beijing’s strategy, acknowledging that piecemeal efforts have failed. However, experts note the need for more targeted policies to address deeper issues like stabilizing the property sector, which has been in contraction for four years.
The People's Bank of China lowered the reserve requirement ratio for banks by 50 basis points and cut key reverse repo rates by 20 basis points. Additionally, China plans to issue special sovereign bonds worth 2 trillion yuan ($284.43 billion) as part of its fiscal stimulus package.
The stimulus measures also supported commodity markets. Iron ore prices climbed 1.8%, copper broke above $10,000 per metric ton, while gold and silver both hit multi-year highs.
Oil, however, saw declines, with Brent futures down 0.8% to $71.09 a barrel, marking a 4.6% weekly loss. This drop follows reports that Saudi Arabia may abandon its unofficial target of $100 per barrel and increase production. The lower oil prices are expected to ease inflationary pressures globally, boosting consumer spending as central banks continue cutting interest rates.
In currency markets, the yen weakened to a three-week low, with the dollar rising 0.5% to 145.47 yen ahead of Japan’s ruling Liberal Democratic Party’s leadership election. The outcome is expected to impact Japan’s monetary policy trajectory.
U.S. Treasury yields held steady in Asia, following a report of lower-than-expected U.S. jobless claims. Markets now see a 51% chance of the Federal Reserve cutting rates by 50 basis points in November, down from 57% the previous day. Two-year Treasury yields rose by 6 basis points to 3.6287%, while 10-year yields increased by 7 basis points to 3.7943% over the week.
(By Commoditiescontrol Bureau: 09820130172)