Hang Seng Index Advances as PBoC Stimulus Boosts Mainland China Stocks

US Equity Markets See a Mixed Friday Session

On Friday, September 20, the US equity markets had a mixed Friday session after Thursday’s breakout. The Dow advanced by 0.09%, while the Nasdaq Composite Index and the S&P 500 declined by 0.36% and 0.19%, respectively.

Friday’s mixed session could influence the Monday Asian session as investors look ahead to another pivotal week for the global markets.

Aussie Private Sector PMIs Send Recession Warning

On Monday, September 23, private sector PMIs from Australia signaled a weakening economy. The Judo Bank Services PMI fell from 52.5 in August to 50.6 in September. Accounting for over 70% of the Australian economy, the drop could further reduce bets on a Q4 2024 RBA rate hike. Furthermore, the Judo Bank Manufacturing PMI declined from 48.5 in August to 46.7 in September.

Judo Bank Economist Matthew De Pasquale commented on the September survey, stating,

“The weakness in PMI activity indicators over the past three months suggests that households are saving more of the government stimulus than initially expected. On the bright side, the stable results over the past quarter indicate that the Australian economy is gradually bringing supply and demand back into balance at the current cash rate. This supports the argument for keeping the cash rate unchanged for an extended period rather than raising it later this year.”

Hopes of Fresh Stimulus from Beijing Drive Market Risk Sentiment

Meanwhile, FICC Investor CN Wire fueled hopes of fresh stimulus measures from Beijing, stating,

“Liu Shijin, former Deputy Director of the Development Research Center of the State Council of China, suggested over the weekend that a comprehensive package of stimulus and reform policies should be introduced to drive China’s economy back onto an expansionary growth path.”

Fresh stimulus measures to bolster the Chinese economy could fuel demand for Mainland China and HK-listed stocks.

People’s Bank of China Boosts Demand for Mainland Stocks

On Monday, the People’s Bank of China (PBoC) surprised the markets by reducing its 14-day repo rate by 10 basis points to 1.85%. The surprise move boosted demand for mainland China stocks. Last week, the PBoC disappointed investors by keeping the 1-year and 3-year loan prime rates at 3.35% and 3.85%, respectively.

Hang Seng Index and Mainland China Markets Advance

On Monday morning, the Hang Seng Index gained 0.74% on PBoC moves and hopes of fresh stimulus from Beijing. Tech stocks led the way, with the Hang Seng Tech Index (HSTECH) advancing by 0.93%. Alibaba (9988) and Tencent (0700) saw gains of 0.63% and 0.13%, respectively, while Baidu (9888) declined by 0.29%.

In mainland China, the CSI 300 and the Shanghai Composite gained 0.69% and 0.72%, respectively, on the PBoC’s policy move.

ASX 200 Risks End to Seven-Day Winning Streak

The ASX 200 Index was down 0.42% on Monday morning, risking an end to a seven-day winning streak. Mining stocks contributed to the morning losses.

Mining giants Rio Tinto Ltd. (RIO) and BHP Group Ltd. (BHP) saw losses of 0.79% and 1.24%, respectively. Iron ore futures were down on Monday after a slump in spot iron ore prices on Friday, impacting demand for mining stocks.

Nikkei Index Futures Climb on Softer Yen

The Nikkei 225 futures rose on Monday morning. The USD/JPY trended higher after the Bank of Japan stated on Friday that there was no immediate need to raise interest rates. The markets in Japan were closed on Monday for the Autumn Equinox holiday. However, the USD/JPY climbed 0.31% to 144.293.

With the focus on the central banks, investors should remain alert and closely monitor news wires, real-time data, and expert commentary to adjust trading strategies accordingly. Stay informed with our latest news and analysis to manage positions across the Asian equity markets.