China’s blue chips climbed another 2.9%, bringing the weekly gain to 14%, the most since November 2008
Chinese stocks are headed for the best week since 2008 as Beijing rolled out a huge stimulus package to revive the economy, lifting Asian shares to 2-1/2-year highs, while a sharp decline in oil prices bodes well for disinflation globally.
The yen pulled back to three-week lows ahead of a leadership contest of Japan’s ruling Liberal Democratic Party on Friday, as investors looked to gauge what it could mean for the country’s rate hike path.
MSCI’s broadest index of Asia-Pacific shares outside Japan added 1.1% to its highest level since February 2022. It was headed for a weekly gain of 6%, thanks to a huge turnaround in Chinese shares.
China’s blue chips climbed another 2.9%, bringing the weekly gain to 14%, the most since November 2008.
Hong Kong’s Hang Seng index also soared 2.7% and was 12% higher for the week, its best performance since 2009.
Beijing seems finally determined to roll out its bazooka stimulus in rapid succession. Beijing’s recognition of the severe situation of the economy and lack of success in a piecemeal approach should be valued by markets, according to Ting Lu, chief China economist at Nomura.
But eventually it is still necessary for Beijing to introduce well thought policies to address many of the deep-rooted problems, particularly regarding how to stabilize the property sector, which is now in its fourth year of contraction, Lu said.
The People’s Bank of China (PBC) on Friday lowered banks’ reserve requirement ratio by 50 bps and cut the 7-day reverse repo rate by 20 basis points. It also cut the 14-day reverse repo rate by 20 basis points, the second cut this week.
Commodities have had a good week on Chinese stimulus. Iron ore prices gained another 1.8% on Friday to more than $100 a metric ton, copper broke above the key $10,000 a ton mark, gold touched another record, and silver reached a 12-year top.
