Asian shares rise on China's policy easing, trade deal hopes

Currency traders working at the foreign exchange dealing room of a bank in Seoul, South Korea, on Dec 16, 2019.
Currency traders working at the foreign exchange dealing room of a bank in Seoul, South Korea, on Dec 16, 2019.PHOTO: AP

SHANGHAI (REUTERS) - SHANGHAI (REUTERS) – Asian shares kicked off 2020 on a strong note on Thursday (Jan 2), spurred by Chinese markets after Beijing eased monetary policy to support the slowing economy.

Investors also cheered news that the United States and China will sign a trade pact soon after months of volatile negotiations between the world’s two largest economies.

European equities were set to follow Asia higher in their first trading session of the new decade. Pan-region Euro Stoxx 50 futures rose 0.62 per cent and FTSE futures were up 0.31 per cent, though German DAX futures fell 0.18 per cent.

US stock futures also suggested a bright start on Wall Street, with S&P 500 e-minis up 0.28 per cent.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.43 per cent, after rising 5.6 per cent in December.

US President Donald Trump said on Tuesday that Phase One of a trade deal with China would be signed on Jan 15 at the White House, though uncertainty surrounds details about the agreement.

Rising hopes for a resolution to the US-China trade war helped propel global equities to record highs late last year and depressed the value of the US dollar.

MSCI’s all-country world index of stock performance in 49 nations touched an all-time high of 567.80 on Dec 27. It was last quoted at 565.28, off 0.44 per cent from that peak.

In China, the blue-chip CSI300 index, one of the world’s best-performing indexes last year, jumped as much as 1.86 per cent on Thursday to its highest level since Feb 7, 2018. It was last up 1.35 per cent.

Hong Kong’s Hang Seng added 1.05 per cent.

Investors were cheered after China’s central bank on Wednesday said that it would cut the amount of cash that banks must hold as reserves, releasing around 800 billion yuan (US$114.9 billion) in funds for lending, effective Jan 6.

Though China’s economy has started to show some signs of bottoming out, analysts say it is not out of the woods yet and expect further growth boosting moves in coming months.

“I think the monetary angle in terms of what it means for the companies, is not that important,” said Jim McCafferty, head of Asia ex-Japan equity research at Nomura in Hong Kong.

“However, for what it means from the consumer point of view, then clearly if there’s easy money and...individuals can borrow cheaply and repay debt quickly, then that of course is going to help the economy and the companies.”

 
 

McCafferty said a recovery in memory chips and new handset development prompted by the roll-out of 5G mobile technology could help lift tech-heavy equity markets like South Korea and Taiwan this year.

Australian shares flicked between small gains and losses before ending up 0.1 per cent. Seoul’s Kospi lost 0.85 per cent, while shares in Taiwan added 0.86 per cent.

Markets in Japan were closed for a national holiday.

The gains in Asia followed a bullish end to the year on Wall Street on Tuesday. The Dow Jones Industrial Average rose 0.27 per cent and the S&P 500 gained 0.29 per cent. The Nasdaq Composite added 0.3 per cent.

In currency markets, the United States dollar was slightly stronger against major peers, but gains were capped as investors continued to expect a better outlook for global growth and trade as well as an end to U.S. economic outperformance.

The dollar was 0.03 per cent stronger against the yen at 108.73 while the euro shaved off 0.04 per cent to 1.1205.

The US dollar index, which tracks the greenback against a basket of six rivals, was up 0.23 per cent to 96.606.

US crude was up 0.28 per cent to US$61.23 and global benchmark Brent crude rose 0.33 per cent to US$66.22 per barrel, building on a rise that gave oil its biggest annual gain in three years in 2019.

Gold, which has benefited from a weaker greenback, was up 0.23 per cent on the spot market despite the slightly strong US dollar. It last fetched US$1,520.37 per ounce.