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Asian stocks rise on China stimulus cheer; Nikkei sees more profit-taking

Published 01/24/2024, 10:23 PM
Updated 01/24/2024, 10:23 PM
©  Reuters Most Asian stocks rose on Thursday, with Chinese markets extending a rebound after the government announced more monetary stimulus measures, while Japanese shares lagged as mixed cues from the Bank of Japan spurred more profit-taking.

Regional markets also took positive cues from a continued record-high streak on Wall Street, although the pace of these gains now appeared to be slowing amid mixed earnings reports.

Chinese stocks lead gains after RRR cut

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes were the top performers in Asia, rising 0.8% and 1.5% as they rebounded further from five and four-year lows.

The two indexes had risen sharply on Wednesday after the People’s Bank of China unexpectedly cut its reserve requirement ratio (RRR) for local banks. The RRR dictates the amount of capital reserves that need to be held by Chinese banks, with the cut now freeing up more liquidity to be injected into the economy.

The PBOC also flagged more measures in the pipeline to help shore up economic growth- the clearest sign so far that Beijing planned to deploy more stimulus. The signals helped Chinese markets rebound from multi-year lows, after weakening economic growth spurred massive capital outflows from regional markets.

Hong Kong gains stymied by EV losses after Tesla Q4 disappointment

Hong Kong’s Hang Seng index rose 0.6%, also extending a rebound from 15-month lows. But bigger gains on the index were held back by losses in heavyweight electric vehicle stocks, which fell tracking disappointing fourth-quarter earnings from major Tesla Inc (NASDAQ:TSLA).

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Hong Kong shares of Chinese EV makers NIO Inc (HK:9866), Li Auto (NASDAQ:LI) Inc (HK:2015) and Xpeng (NYSE:XPEV) Inc (HK:9868) sank between 5% and 8%, while those of BYD (HK:1211), which is a key competitor of Tesla, fell 3.5%.

Tesla’s earnings ramped up concerns over slowing demand for EVs, with the carmaker also flagging weaker sales and production growth in 2024. The forecast also heralded more price cuts from the EV major, which is expected to further dent profit margins in the sector.

Broader Asian markets clocked some gains. Australia’s ASX 200 rose 0.4%, tracking optimism over China, while futures for India’s Nifty 50 index pointed to a positive open after the index rebounded 1% on Wednesday.

Still, bigger gains outside China were restrained by increased caution ahead of a European Central Bank meeting, as well as key U.S. fourth-quarter GDP data due later in the day. The data also comes just days before the Federal Reserve’s first meeting in 2024, where the central bank is expected to reiterate its higher-for-longer stance on interest rates.

Among decliners for the day, South Korea’s KOSPI fell 0.6% even as data showed GDP grew slightly more than expected in the fourth quarter. But the overall pace of growth remained weak.

Japan sees more profit-taking after BOJ talks pivot

Japan’s Nikkei 225 fell 0.2%, while the broader TOPIX index was flat as investors continued to collect profits from the two recently reaching 34-year highs.

A recent rally in Japanese markets was cut short after Bank of Japan Governor Kazuo Ueda offered the clearest signals yet that the central bank will eventually pivot away from its ultra-dovish policy. While he offered scant cues on the timing of a pivot, his comments were sufficient in making investors pause a recent run in Japanese shares.

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Latest comments

Markets that need stimulus aren’t worth anything at all.
Lol. 10 trillion in losses and climbing and tbey are cheering a few bucks of printing… like a snowflake will put out a forrest fire
Nekkei should pray for another earthquake to rebound
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