Markets rise as traders cheered by China property plan
Shares in Hong Kong extended a rally that has seen the Hang Seng Index race around 30 percent higher from its January low
Hong Kong – Equities rose Monday, extending a rally in New York that saw the Dow close at a record high, with sentiment boosted by China’s plan to support its struggling property sector and hopes for a US interest rate cut.
The announcement out of Beijing on Friday provided a much-needed boost to the country’s ailing developers, many of whom are drowning in a sea of debt.
The multibillion-dollar plan — as well as an easing of deposit requirements for buyers — fuelled optimism for the outlook in the world’s number-two economy, which has been hobbled by the property crisis.
While analysts have warned the package of proposals was still too small to solve the problem and might not go far enough, traders continued to buy up risk assets.
“We believe the policy package is just the beginning of the central government’s efforts to turn the sector around,” said Nomura Holdings analysts.
“We believe the swift introduction of the policy package with arguably limited implementation details also implies the central government’s increasing urgency to alleviate the downward spiral of the property sector.”
Hong Kong extended its recent gains, though some Chinese developers fell on profit-taking after soaring in the previous session. Shanghai, Tokyo, Sydney, Seoul, Mumbai, Wellington, Taipei, Manila and Jakarta also advanced.
Bangkok edged slightly higher as data showed the Thai economy grew more than expected in the first quarter but at a slower pace than the previous three months.
London, Paris and Frankfurt opened higher.
The positive start to the week came after the Dow ended above 40,000 for the first time on Friday, while the S&P 500 also rose.
Investors are now looking forward to the release Wednesday of minutes from the Federal Reserve’s May policy decision, hoping for some insight into the thinking of decision-makers.
The release comes after data last week showed inflation easing in April, reviving hopes the central bank would cut rates twice this year. That came after rising more than expected in the previous three months.
Analysts forecast two reductions before January, with more over the next two years.
However, Fed governor Michelle Bowman said she thought borrowing costs should remain elevated in order to make sure officials have prices under control, and warned she would support another hike if data came in above estimates.
“My baseline outlook continues to be that inflation will decline further with the policy rate held steady, but I still see a number of upside inflation risks that affect my outlook,” she said.
“There is also the risk that the loosening in financial conditions since late last year and additional fiscal stimulus could add momentum to demand, stalling any further progress or even causing inflation to reaccelerate.
“While the current stance of monetary policy appears to be at a restrictive level, I remain willing to raise the target range for the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or reversed.”
The prospect of US interest rates coming down boosted gold prices to another record of $2,440.59 — topping its previous all-time high seen last month — as lower borrowing costs make the precious metal more attractive.
The gains have also been fuelled by its safe-haven status after news that Iran’s President Ebrahim Raisi and Foreign Minister Hossein Amir-Abdollahian had been killed in a helicopter crash.
Copper also hit a record above $11,000 on optimism over the outlook for the global economy thanks to the expected easing of borrowing costs.
– Key figures around 0715 GMT –
Tokyo – Nikkei 225: UP 0.7 percent at 39,069.68 (close)
Hong Kong – Hang Seng Index: UP 0.5 percent at 19,657.01
Shanghai – Composite: UP 0.5 percent at 3,171.15 (close)
London – FTSE 100: UP 0.2 percent at 8,437.01
Dollar/yen: UP at 155.75 yen from 155.71 yen on Friday
Euro/dollar: UP at $1.0882 from $1.0873
Pound/dollar: UP at $1.2706 from $1.2702
Euro/pound: DOWN at 85.65 from 85.67 pence
West Texas Intermediate: UP 0.3 percent at $80.28 per barrel
Brent North Sea Crude: UP 0.5 percent at $84.37 per barrel
New York – Dow: UP 0.3 percent at 40,003.59 (close)