Asian stocks surged following China’s latest initiatives to bolster its equity market and real estate sector, sparking a wave of optimism among investors. Energy shares experienced notable gains driven by higher oil prices, contributing to the overall positive sentiment.
In Hong Kong, property shares climbed after Guangzhou relaxed home-buying restrictions, signaling potential growth in the real estate sector. Meanwhile, China’s securities regulator announced plans to suspend the lending of certain shares for short selling, adding to ongoing efforts to stabilize the nation’s stock market, which has witnessed a significant decline, with the MSCI China Index plummeting by about 60% from its peak in February 2021.
Homin Lee, a senior macro strategist at Lombard Odier, commented on Bloomberg Television that the prevailing pessimism in Chinese shares might pave the way for a technical rebound, albeit cautioning that a fundamental shift in the inflation outlook and private sector sentiment is necessary for sustained improvement.
Despite the positive momentum in Hong Kong, mainland China shares failed to match the gains amid concerns over the Biden administration’s proposed measures requiring US cloud firms to disclose foreign clients involved in developing AI applications. This proposal, slated for release on Monday, raises tensions between Washington and Beijing, following recent legislative proposals targeting Chinese biotech companies.
In other developments, shares of China Evergrande Group were suspended in Hong Kong after plummeting nearly 21% due to a court order for the company’s liquidation.
Japanese equities posted gains, particularly among commodity-related producers. Meanwhile, US stock futures remained stable as investors assessed geopolitical risks stemming from conflicts in the Middle East at the onset of a busy week for global policy outlook.
The rally in oil prices continued, with Brent and West Texas Intermediate crude reaching their highest levels since November amid escalating tensions in the Middle East. The US announced retaliatory measures following an attack by Iranian-backed militants that resulted in the death of three service members, further boosting oil prices.
The Australian and New Zealand dollars outperformed other G-10 currencies, buoyed by higher commodity prices and the positive impact of China’s market support measures on investor sentiment.
In the currency markets, the US dollar and Treasuries remained largely unchanged in Asia. Mixed economic data from the US on Friday raised concerns that the Federal Reserve may adopt a patient approach towards interest rate adjustments during its upcoming policy decision on Wednesday.
Looking ahead, a busy week awaits with key data releases including European GDP, China PMI, Australian inflation, European inflation, and a Bank of England policy decision, among others.
