Asian Stocks Climb on China Stimulus Optimism; Australia Falls Behind Ahead of RBA Meeting

Asian Markets Rally as China Unveils New Stimulus Measures

Most Asian stocks experienced gains on Tuesday, with Chinese markets leading the way following announcements of additional stimulus from Beijing. In contrast, Australian markets underperformed ahead of a meeting of the Reserve Bank.

Regional markets drew positive momentum from modest overnight gains on Wall Street, where U.S. markets maintained proximity to record highs. However, Wall Street futures declined during Asian trading hours, indicating that the recent rally might be losing steam.

Many Asian markets benefitted from robust gains over the past week, with investors responding positively to a significant interest rate cut by the Federal Reserve. This week, attention is focused on further developments from the Fed and their implications for the U.S. economy.

Chinese Stocks Surge on Stimulus Initiatives

China’s major indices, including the Shanghai Shenzhen CSI 300 and Shanghai Composite, increased by 0.5% and 0.7%, respectively. Meanwhile, Hong Kong’s Hang Seng index soared by 1.8%, emerging as the top performer in Asia.

Chinese officials disclosed a series of planned initiatives aimed at stimulating economic growth, notably a reduction in reserve requirements for banks by 50 basis points to enhance liquidity. To address challenges in the troubled property market, the government announced plans to cut mortgage rates for current loans and is reportedly preparing at least 500 billion yuan in liquidity support for local stocks.

These developments followed the People’s Bank of China’s decision to lower a short-term repo rate on Monday to further bolster liquidity. These measures are intended to support economic growth, as China grapples with ongoing disinflation and a protracted downturn in the property sector.

The CSI300 and SSEC had recently reached nearly eight-month lows, while the Hang Seng was recovering from earlier losses.

Broader Asian markets also advanced, with Japan’s Nikkei 225 index rising by 0.8%. The TOPIX added 0.5% following positive purchasing managers’ index data indicating stronger-than-expected growth in the country’s services sector for September. However, manufacturing activity in Japan contracted for the third consecutive month.

In South Korea, the KOSPI index remained unchanged, and futures for India’s Nifty 50 index indicated a slightly weaker start as it encountered resistance near the 26,000-point mark.

Australian Stocks Decline Ahead of RBA Meeting

The ASX 200 in Australia was the worst performer in the region, declining by 0.5% ahead of a Reserve Bank of Australia meeting later in the day. The RBA is widely anticipated to maintain interest rates at current levels, although it is expected to adopt a more hawkish stance given persistent inflation and robust labor market conditions.

The central bank is likely to indicate that interest rates will remain elevated for an extended period and may reiterate warnings about potential future rate hikes. Upcoming consumer price index inflation data, set to be released on Wednesday, is expected to provide further insights into the Australian economy.