Chinese shares rally on hopes a US rate cut might attract foreign investment
Chinese shares had a boost after top US Federal Reserve Chair, Jerome Powell, hinted that a drop in rates is 'not far' away.
This announcement lit a spark under Chinese stocks, with the hope the rate drop might ease pressure on Chinese money and draw more foreign investors into their markets. The Hang Seng Index, an important gauge of Hong Kong's stock market, perked up by 0.8%, closing at 16,353.39. The tech stocks led this upward march, going up by 1%.
This follows top officials in China showing off plans to bolster research in industries to crack big tech challenges, like computer chips. China's other major markets wobbled between little losses and gains throughout the day. The Shanghai Composite Index, measuring businesses listed in Shanghai, nudged up 0.6%, ending the day at 3,046.02.
Meanwhile, the smaller market in Shenzhen saw a greater climb by 1.1%. On Thursday, Jerome Powell, the boss of the Federal Reserve (the America's central bank), shared he and his team are "not far" from making cuts to interest rates something Wall Street really want. He added they were waiting for the right time.
"We're waiting to become more confident that inflation is moving sustainably at 2%," Mr Powell explained. To put a cherry on top, better-than-expected info about trade landed on Thursday which seemed to hint at more demand for Chinese goods sent abroad.
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Data from customs showed exports - stuff being sold abroad - for January and February this year jumped 7.1% compared to last year. This is up from a 2.3% rise seen in December. Imports, or stuff being bought from overseas rose by 3.5%, a jump from just a 0.2% growth the previous month.
Despite issues in the property market, rising local government debts, and geopolitical tensions, this data backs up Beijing's efforts to boost the economy. Stephen Innes of SPI Asset Management commented: "The robust performance in overseas shipments may provide some semblance of relief amid persistently subdued domestic demand," but he warned that "However, China cannot depend solely on international markets to purchase inexpensive goods to salvage its economy."
E-commerce giant Alibaba Group Holding saw a 1% increase. NetEase was up by 2.5%, while Tencent dropped by 0.2%. On the downside, video-sharing platform Bilibili fell by 2.6% after the company's financial report revealed a net loss of 1.297 billion yuan ($180 million dollars) in the fourth quarter of 2023, which is a 13% improvement compared to the same period last year.
S&P Global stated that China's credit rating might be downgraded if the country's economic recovery remains weak or heavily reliant on extensive stimulus measures. The last time S&P downgraded China was in 2017, but Moody's, another agency, put Beijing on downgrade alert in December due to concerns over potential bailouts of local governments resulting from the country's property market downturn.
On Thursday, the U. S. House of Representatives is set to speed up a vote on a bill that would force TikTok's parent company, ByteDance, to sell off the app within six months or face a ban in the U. S. TikTok has about 170 million users in the U. S. and attempts to ban the app have been ongoing since 2020, during the time of former US president Donald Trump.
In the bond market, China's central bank carried out a seven-day reverse repurchase of 10 billion yuan (1.41 billion dollars) at an interest rate of 1.8% on Friday. The People's Bank of China stated that this move was made to maintain liquidity in the banking system.
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