Dec 14, 2023: Most Asian stocks surged significantly on Thursday following the Federal Reserve’s announcement of halting interest rate hikes and considering potential cuts in 2024. However, apprehensions about China’s economic slowdown restrained these gains.
Australia’s ASX 200 led the gains, climbing 1.6% driven by robust performances in banks and commodity stocks. The market was further lifted by data demonstrating the enduring resilience of Australia’s labor force, despite a slight uptick in the November unemployment rate.
South Korea’s KOSPI soared 1.1%, propelled by a surge in technology stocks tracking the U.S. Treasury yields’ overnight decline. This momentum spilled over to Hong Kong’s Hang Seng index, adding 0.9% despite mainland stock weakness.
The broader Asian markets mirrored the positive sentiment post the Fed’s signal of ending its rate hike cycle and contemplating larger-than-anticipated rate cuts in 2024. Traders now foresee an increased likelihood of rate reductions as early as March 2024.
A robust Wall Street closure also influenced Asian markets positively, witnessing the Dow Jones Industrial Average reaching a record high.
The prospect of lower interest rates augurs well for Asian markets, potentially attracting higher foreign capital flows into the region. In a low-rate environment, assets vulnerable to risks, especially stocks, stand to benefit.
India’s Nifty 50 index futures indicated a positive start, hinting at potential new peaks following a series of record highs over the past fortnight, largely driven by optimism surrounding the Indian economy.
Contrarily, Japan’s Nikkei 225 index declined 0.6%, experiencing profit-taking after three consecutive days of gains. While tech stocks surged, losses in automobile and industrial stocks persisted, accentuated by concerns about China’s slowdown, a significant export market for Japan.
Chinese stocks continued to lag, with Shanghai Shenzhen CSI 300 hovering near five-year lows and the Shanghai Composite trading flat. Lingering caution stems from recent data indicating China slipping further into deflation in November.
All eyes are on the upcoming industrial production and retail sales data for November, set for release on Friday, to glean further insights into Asia’s largest economy.
Reports suggesting Beijing’s intent to ease regulations for its National Social Security fund to invest in pension products and specific options trades offered some respite to local markets. However, the impact on the economy is expected to be limited. Chinese stock indices endured among the worst performances in Asia this year, largely impacted by persistent economic concerns.