After the government announced additional stimulus measures, the majority of Asian stock markets rose on Monday, with Chinese indices leading the way, while domestic stocks in Japan fell on concerns that the Bank of Japan might take further hawkish action.
China’s top companies Shanghai Asia’s top performer was the Shenzhen CSI 300 index, which increased 2% to a level close to five months’ high after the People’s Bank of China added extra liquidity to the banking sector. The action is taken in advance of the lunar new year holiday, when it is anticipated that liquidity will grow.
Markets interpreted the liquidity boost as an indication that the Chinese government intends to implement additional spending initiatives as the nation struggles with its biggest COVID-19 epidemic to date.
Related:Â Asian stocks go up because people think China will get better and the Fed will raise interest rates less.
Markets interpreted the liquidity boost as an indication that the Chinese government intends to implement additional spending initiatives as the nation struggles with its biggest COVID-19 epidemic to date.
After the majority of anti-COVID measures were relaxed this year and China reopened its borders last week, it is also anticipated that the Chinese economy will gradually rebound this year. Since December, local equities have been soaring on that belief.
While Hong Kong’s Hang Seng index increased by 0.7% to a six-month high, the Shanghai Composite index increased by 1.6%.
Additionally, markets exposed to China increased. While Australia’s ASX 200 index increased by 0.8%, the Taiwan Weighted index increased by 0.6%.
In contrast, Japan’s Nikkei 225 index dropped 1.2% as local bond yields rose ahead of this week’s Bank of Japan policy meeting. The central bank is under increasing pressure to tighten its monetary policy after local inflation soared to more than 40-year highs in December.
In December, the bank unpredictably adopted a hawkish stance, which caused investors to prepare for a similar action this week.
The consumer price index report due later this week is anticipated to reflect a similar pattern. Data released on Monday revealed that producer price index inflation reached a 41-year high in December.
Broader Asian stocks increased as a result of persistent wagers that the U.S. Federal Reserve will increase interest rates in the upcoming months at a slower rate.
Related: As the Fed minutes take centre stage, Asian stocks rise and the dollar fluctuates.
Now the focus is on a flood of important economic data that is due later this week. While markets anticipate a recovery in China’s economy this year, they are concerned about a slowdown in other major economies, particularly as the implications of a strong tightening of monetary policy through 2022 start to be realised.
Markets are focusing on fourth-quarter corporate earnings reports to determine whether declining economic trends have an impact on the financial performance of large corporations.
