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Asia stocks gain, with Chinese markets extending a rebound

Asia stocks down

China’s Shanghai Shenzhen and Shanghai Composite indexes were the top performers in Asia, gaining 0.8% and 1.5% as they bounced back further from five and four-year lows

Most Asian stocks gained on Thursday, with Chinese markets extending a rebound after the government announced more monetary stimulus measures, while Japanese shares lagged as mixed signals from the Bank of Japan triggered more profit-taking.

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

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

The two indexes had gained 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 People’s Bank of China 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 bounce back from multi-year lows, after slowing economic growth spurred massive capital outflows from regional markets.

Hong Kong’s Hang Seng index gained 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 dropped tracking disappointing Q4 earnings from major Tesla Inc.

Hong Kong shares of Chinese EV makers NIO Inc, Li Auto Inc and Xpeng Inc dipped between 5% and 8%, while those of BYD, which is a key competitor of Tesla, dropped 3.5%.

Wider Asian markets clocked some gains. Australia’s ASX 200 gained 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 ECB meeting, as well as key U.S. fourth-quarter Gross Domestic Product (GDP) data due later in the day. The data also comes just days before the Fed’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 dropped 0.6% even as data showed GDP grew slightly more than expected in Q4. But the overall pace of growth remained weak.

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