Asian Markets Rally on China’s Stimulus Hopes Despite Weak Data
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Asian equity markets rallied on Wednesday as investor optimism rose over fresh economic stimulus from China, even as new data highlighted persistent weaknesses in the world’s second-largest economy.
The Hang Seng Index jumped 1.8%, and the Shanghai Composite gained 0.9% after Beijing unveiled a series of targeted policy measures aimed at reviving sluggish domestic demand and stabilizing the troubled property sector.
The Chinese government announced late Tuesday a 100 billion yuan ($13.8 billion) liquidity injection into key state-owned banks to boost lending for infrastructure and green energy projects. Additionally, new subsidies were introduced for first-time homebuyers and small business grants were expanded in urban areas.
“Beijing is clearly stepping up its efforts to support the economy ahead of the third quarter,” said Raymond Ho, head of Asia strategy at GenAsia Capital. “The timing is critical as confidence in both the consumer and housing markets remains weak.”
Despite the market bounce, macroeconomic data released on Wednesday painted a mixed picture. China’s Caixin manufacturing PMI for June came in at 49.2, slipping back into contraction territory, while new export orders continued to decline amid global demand headwinds.
Elsewhere in Asia, markets took a cue from China’s rally. Japan’s Nikkei 225 rose 0.7%, buoyed by gains in tech and consumer stocks. South Korea’s KOSPI added 0.5%, helped by a surge in chipmaker shares including Samsung and SK Hynix.
The Indian Sensex, however, closed flat as investors adopted a wait-and-see approach ahead of the Reserve Bank of India’s monetary policy review later this week.
Currency markets were relatively stable. The Chinese yuan firmed slightly against the U.S. dollar following the stimulus announcement, while the Japanese yen continued to hover near 34-year lows, raising speculation of potential currency intervention by the Bank of Japan.
Meanwhile, global investors remain cautious over the sustainability of China’s recovery. Foreign direct investment into China fell for the third straight quarter, and concerns persist over deteriorating demographics, slowing exports, and the high debt burden in the property sector.
“The short-term boost is welcomed by markets, but structural reforms are what investors are really waiting for,” said Alina Park, an economist at Seoul-based Horizon Asia.
Commodities also responded positively to China’s stimulus. Industrial metals like copper and aluminum saw modest gains on expectations of rising infrastructure demand.
As Beijing moves to stabilize the economy amid mounting pressure, analysts warn that any relief may be temporary unless underpinned by broader reforms and stronger domestic consumption.
