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Asian stocks rise on potential China rescue package

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The MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.27%

Asian shares rose on Wednesday on optimism that Chinese authorities will offer support for its stock markets, which have slumped to multi-year lows, while a hawkish tilt from the BoJ lifted the yen.

The MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.27%. Still, the index is 5% lower in January, set for its worst monthly performance since August.

Japan’s Nikkei was down 0.68%, a day after reaching a new 34-year high, and the yen firmed as traders took note of the BoJ’s hawkish tilt on Tuesday.

The focus in Asia has squarely been on Chinese equity markets after a tepid start to the year. A report on Tuesday said that authorities were preparing a package of measures worth $278 billion to stabilise the market offered some hope the markets may steady though investors remained sceptical and unimpressed.

I suspect policymakers would prefer markets to be more stable, but I doubt they plan to make huge unconditional injections into markets, said Ben Bennett, APAC investment strategist for Legal and General Investment Management.

More they want to suggest that it is not a one-way bet for markets to go down. Hopefully this leads to a bit of stabilization now, Bennett said.

On Wednesday, Chinese stocks were mixed. The blue chip index was down 0.4%, rooted near the five-year lows, while the Shanghai Composite added 0.11%. Hong Kong’s Hang Seng index rose 1.5% but is 8% lower in January.

Hong Kong stocks were also boosted by Alibaba Group shares, which added 6% after a report said co-founder Jack Ma and Chairman Joe Tsai bought millions worth of shares in the Chinese e-commerce giant in Q4.

Anderson Alves, a trader with ActivTrades, said market participants are actively monitoring this development, as its confirmation or refutation could inject considerable volatility.

Should the package exceed expectations in scale and scope, it might spark a substantial rally in equities, specifically at the current levels, Alves said.

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