Asian stocks surged on Wednesday as expectations of lower U.S. interest rates and the Bank of Japan’s dovish stance fueled investor optimism for a more accommodative environment in the upcoming year.
Japan’s Nikkei 225 remained a standout performer, jumping 1.8% to reach a 33-year high following the Bank of Japan’s decision to maintain its ultra-dovish policy. The lack of clear signals for a potential policy shift in 2024 further reinforced expectations of prolonged accommodative conditions in Japan.
The buoyant sentiment around the BOJ’s stance helped offset weaker-than-anticipated imports and exports data for November, reflecting the economy’s vulnerability to sluggish conditions in major trading partners like China.
In contrast, Chinese stocks trailed, with the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes sliding 0.4% and 0.3% respectively. The People’s Bank of China’s decision to keep its benchmark loan prime rate unchanged underscored limited room for additional monetary stimulus, contributing to dampened market sentiment.
The broader Asian market drew encouragement from a robust overnight performance on Wall Street, where U.S. benchmarks approached new highs. The dovish tones set by the BOJ and major central banks’ meetings closing for the year positioned risk-driven assets for potential gains in the coming year.
Despite the overall positive sentiment, uncertainty lingers over the timing of potential Fed rate cuts. Some Fed officials attempted to temper expectations for immediate rate cuts in early 2024, contributing to slight constraints on market gains.
Hong Kong’s Hang Seng index bucked the trend among Chinese stocks, rising 1.1% on the back of strength in energy and prominent technology stocks.
Australia’s ASX 200 climbed 0.6% to a 10-month high, reflecting growing optimism that the Reserve Bank of Australia might halt further interest rate hikes. Strong performances in mining and bank stocks significantly contributed to the ASX’s gains.
South Korea’s KOSPI surged 1.4%, primarily driven by heavyweight tech stocks, while India’s Nifty 50 index futures hinted at a modestly positive opening. Optimism surrounding India’s economy remains a strong factor supporting the Nifty, likely to continue attracting foreign capital flows into the country.
