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Hang Seng Index, ASX 200, Nikkei 225: HSI Up Amid US Uncertainty and PBoC Rate Cuts
By:
Key Points:
- On Monday, July 22, the Hang Seng Index bucked a negative morning Asian session.
- News of US President Joe Biden withdrawing from the US Presidential Election race impacted market risk sentiment.
- The People’s Bank of China unexpectedly cut one-year and five-year loan prime rates, supporting the Hang Seng Index.
In this article:
Meanwhile, news from Capitol Hill also set the tone for the Asian session on Monday.
US President Biden Fuels Political Uncertainty
On Sunday, July 21, US President Joe Biden announced his withdrawal from the US Presidential Election race.
Biden’s withdrawal could increase Trump’s chances in the November Presidential Election. A Trump victory could increase US-China trade tensions and kickstart another trade war.
Eurasia Group President Ian Bremmer commented on the Biden news, stating,
“Over 100 days remain before the election. That’s an eternity – longer than the entire campaign in most democracies. Trump remains the favorite. But anything can happen. Biden’s decision to stand aside has made this a wide-open race.”
Although over 100 days remain until Election Day, political uncertainty could impact market risk appetite.
Asian Markets: People’s Bank of China Cuts Loan Prime Rates
On Monday, July 22, the People’s Bank of China (PBoC) unexpectedly cut the one-year and five-year loan prime rates. Lower borrowing costs may boost demand for credit and increase private consumption. A pickup in demand could support the Chinese economy and fuel buyer demand for riskier assets.
Furthermore, the PBoC cut the 7-day Reserve Requirement Ratio (RRR) by ten basis points to 1.7% to bolster the Chinese economy.
The PBoC moves follow disappointing Q2 2024 GDP numbers from China. The Chinese economy expanded by 4.7% in Q2, down from 5.3% in Q1.
Hang Seng Index and Mainland China Stocks Diverge on PBoC Moves
Meanwhile, the Hang Seng Index advanced by 0.44% on Monday morning. Tech stocks contributed to the morning gains.
The Hang Seng Tech (HSTECH) Index gained 0.14%. Alibaba (9988) and Tencent (0700) were up 0.34% and 0.41%, respectively, while Baidu (9888) declined by 0.62%.
However, Mainland China’s equity markets extended their losses from Friday, with US politics overshadowing PBoC action. The Shanghai SE Composite Index and CSI 300 declined by 0.87% and 0.70%, respectively.
Nikkei Index Slides on Tech Stocks Pullback
The Nikkei Index slid by 1.03% on Monday despite a higher USD/JPY.
Sony Group Corp. (6758) and Tokyo Electron Ltd. (8035) saw losses of 1.33% and 1.09%, respectively.
ASX 200 falls as Oil, Mining, and Bank Stocks Retreat
The ASX 200 Index fell by 0.80% on Monday morning. Mining, oil, and banking stocks contributed to the losses.
Woodside Energy Group Ltd (WDS) tumbled by 2.91% after crude oil prices fell on Friday.
Concerns about a Q3 2024 RBA rate hike affected demand for Bank stocks. ANZ Group Holdings Ltd (ANZ) declined by 1.41%.
Mining stocks also struggled after iron ore spot prices retreated on Friday. Fortescue Metal Group (FMG) was down 1.57%.
Investors should remain alert with US politics and the Chinese economy in focus. Closely monitor the news wires, real-time data, and expert commentary to manage trading strategies accordingly. Stay informed with our latest news and analysis to trade the Asian equity markets.
About the Author
Bob Masonauthor
With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.
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