Hang Seng Index Up 13%, Mainland Stocks Surge as China Implements Stimulus

US Equity Markets End the Week Higher on Fed Rate Cut Bets

The US equity markets ended the week of September 27 with positive gains. Notably, the Dow climbed to an all-time high of 42,630 before settling at 42,246, up by 0.55%. The Nasdaq Composite Index advanced by 0.95%, while the S&P 500 gained 0.62%.

US Economic Indicators Support a Soft Landing

Recent US economic indicators drove expectations of a soft US economic landing. Reports such as the S&P Global Services PMI, initial jobless claims, and Michigan Consumer Sentiment survey beat expectations, driving optimism. Furthermore, the US Personal Income and Expenditures Report fueled speculation about a possible 50-basis point November Fed rate cut.

The prospect of a 50-basis point Fed rate cut, combined with signals of a soft US economic landing, set a bullish tone for the global equity markets.

People’s Bank of China and China’s Politburo Fuel Asian Market Rally

It was a pivotal week for the Hong Kong and Mainland China’s equity markets. On Tuesday, September 24, the PBoC cut the Reserve Requirement Ratio by 50 basis points and lowered existing mortgage rates. The PBoC also discussed launching a stabilization fund to support the capital market.

Later in the week, the PBoC cut the 1-year Medium-Term Lending Facility (MLF) by 30 basis points to 2.0%. News also hit the wires of Beijing considering a $142 billion capital injection for large Chinese banks, a possible first since the global financial crisis in 2008. Thursday’s Politburo meeting outlined plans to boost income and consumption, further bolstering investor confidence.

FICC Investor CN Wire shared planned policy measures discussed in the Politburo meeting, including:

• To reduce RRR, enforce significant interest rate cuts.
• Committed to essential fiscal expenditure.
• Committed to meeting annual economic and social development goals.
• Plans to boost income for low and middle-income groups and enhance consumption structure.

By Friday, the PBoC cut the 14-day reverse repo rate from 1.85% to 1.65%.

Hang Seng Index and Mainland Chinese Equity Markets Soar

In the week ending September 27, the Hang Seng Index soared by 13%, its highest level since May 2023. Investors expect the PBoC and Politburo’s measures to increase liquidity and boost consumption.

Significantly, investors viewed the policy moves as favorable for the Chinese real estate market. The Hang Seng Mainland Properties Index (HMPI) surged 30.64% in the week ending September 27. Notable stock gains across the real estate sector included Longfor Group Holdings Ltd. (0960) (+56.44%), Shimao Group Holdings Ltd. (0813) (+69.81%), and Agile Group Holdings Ltd. (3383) (+46.51%).

The tech sector also benefitted, with the Hang Seng Tech Index (HSTECH) ending the week up by 20.23%.

Notable tech stock movers included Baidu (9888) and Alibaba (9988), which rallied by 17.73% and 17.55%, respectively, while Tencent (0700) gained 12.66%.

From mainland China, the CSI 300 jumped by 15.70%, while the Shanghai Composite gained 12.83%.

Commodities Surge on China’s Policy Maneuvers

China’s policy measures also drove buyer demand for iron ore over the hopes of a pickup in economic activity. Spot iron ore advanced by 15.62% in the week ending September 27, while gold climbed by 1.38% to $2,658.

ASX 200 Climbs on Mining Stocks

The ASX 200 saw a modest 0.03% increase for the week. Mining giants BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) benefited from China’s fresh policy measures, with weekly gains of 10.91% and 12.77%, respectively.

Yen Weakness Lifts Nikkei-Listed Export Stocks

Tokyo inflation data reduced expectations of a Q4 2024 Bank of Japan rate cut, driving USD/JPY demand. The USD/JPY surged to a Friday, September 27, high of 146.491 before hitting the reverse during Friday’s US session. The weakening Yen boosted demand for export-driven stocks.

Among the gainers for the week, Tokyo Electron (8035) rallied by 13.32%, while Softbank (9984) advanced by 6.19%. Nissan Motor Corp. (7201) and Sony Corp. saw gains of 5.47% and 7.03%, respectively.

Outlook

As central banks and Beijing’s stimulus remain in focus, traders should closely monitor news, 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.