Stocks, currencies perk up on China stimulus signals

Investors looking at an electronic board showing stock information at a brokerage house in Hangzhou, Zhejiang province, China, on Nov 27, 2015.
Investors looking at an electronic board showing stock information at a brokerage house in Hangzhou, Zhejiang province, China, on Nov 27, 2015. PHOTO: REUTERS

HONG KONG • Hopes that China will implement fresh economic reforms lifted emerging-market currencies yesterday and oil and metal prices saw a rare uptick, while most Asian stock markets extended the previous day's gains.

The Shanghai Composite Index rose 0.3 per cent as the Chinese government signalled more stimulus measures at a top economic conference, saying monetary policy must be more "flexible" and fiscal policy more "forceful" to combat slowing growth.

Asian stocks also rose in thin trading as investors weighed the prospect of more stimulus from Chinese leaders. Energy and telecommunications shares led the advance.

The announcement is the latest from Beijing after it promised last year to let the market play a bigger role in the world's No. 2 economy and implement reforms of bloated state-owned enterprises. It also follows other moves to kick- start slowing growth, including six interest-rate cuts since November last year.

"We have had easing on multiple fronts in China, and we are starting to see the green shoots of recovery there," said Mr Nader Naeimi, Sydney-based head of dynamic markets at AMP Capital Investors. "We should see China's economy turn the corner in 2016 and the US dollar peaking, which will have a powerful positive impact on commodities and related sectors."

Currencies of economies that rely on trade with China climbed against the dollar. The Australian dollar rose 0.7 per cent, Indonesia's rupiah surged 1.1 per cent to a one-month high, the Thai baht was 0.2 per cent higher and the Singapore dollar added 0.2 per cent. The South Korean won, Canadian dollar and Taiwan dollar also advanced.

China's central bank added cash to the financial system via a short-term lending tool yesterday. The People's Bank of China auctioned 30 billion yuan (S$6.5 billion) of seven-day reverse repurchase contracts in its open- market operations at a yield of 2.25 per cent, up from 10 billion yuan a week earlier.

The possibility of Chinese stimulus measures also lifted commodities, with copper rising 1.1 per cent and iron ore surging more than 3 per cent.

Brent oil futures advanced 0.7 per cent to US$36.59 a barrel. The grade fell to as low as US$36.04 on Monday, the least since July 2004. West Texas Intermediate futures for February rose as much as 0.9 per cent.

However, most analysts expect prices to remain subdued by a global supply glut, tepid demand, the Organisation of Petroleum Exporting Countries' refusal to cut production and a strong US dollar.

Equities from Tokyo to Sydney advanced, while those in Seoul fell. The Straits Times Index climbed 7.42 points, or 0.26 per cent, to close at 2,852.97.

"Equity valuations are still compelling," said Mr George Boubouras, Melbourne-based chief investment officer at Contango Asset Management. "We expect lighter volumes going into Christmas this week. Relative valuations are still there" favouring equities, he said.

BLOOMBERG, AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on December 23, 2015, with the headline 'Stocks, currencies perk up on China stimulus signals'. Print Edition | Subscribe