SINGAPORE — Shares in Asia-Pacific were mixed in trading on Thursday, with mainland China stocks among the biggest gainers regionally on hopes of political support from authorities. Singapore and South Korea also announced tightening of monetary policy.
By market close on Thursday in mainland China, the Shanghai composite was up 1.22% to 3,225.64, while the Shenzhen component was up 1.266% to around 11,714.62.
The Chinese government announced on Wednesday that reserve requirement ratio cuts will be made “at a convenient time to increase banks’ borrowing capacity,” citing details of an executive session of the State Council chaired by Premier Li Keqiang.
This development comes as China has been battling its worst Covid outbreak on the mainland in recent weeks since the pandemic’s early stages in early 2020.
“Whether it’s looking at big data blips on the number of ships waiting offshore in Shanghai, or just chatting with my colleagues in Shanghai, there will be significant disruption to the Chinese economy from the current lockdowns, we are seeing from Covid.” David Wong, senior equity investment strategist at AllianceBernstein, told CNBC’s Street Signs Asia on Thursday.
Although the inflation problem is not as severe as in many parts of the developed world, it is understandable that both central banks [of South Korea and Singapore] try to make sure they act preventively.
Clara Cheong
Global Market Strategist, JPMorgan Asset Management
“I think what we’re seeing now in terms of policy easing may partially offset, but may not fully offset, some of those negative fundamental impacts,” Wong said.
In Hong Kong, the Hang Seng Index was also up 0.57% by the last hour of trading. Shares of CNOOC, which is listed in the city, rose about 1%. Reuters reported on Wednesday that the Chinese oil company is preparing to suspend operations in several western countries amid fears of sanctions.
Elsewhere, the Nikkei 225 in Japan rose 1.22% to close at 27,172, while the Topix index rose 0.95% to 1,908.05.
In Australia, the S&P/ASX 200 was up 0.59% to end the day at 7,523.40. Australia’s unemployment rate stayed at 4% in March, according to official data released on Thursday. That was slightly worse than expectations in a Reuters poll for an unemployment rate of 3.9%.
MSCI’s broadest index of Asia Pacific stocks outside of Japan gained 0.43%. Markets in India are closed on Thursday for a public holiday.
Monetary tightening in Singapore, South Korea
Elsewhere, stocks in South Korea and Singapore struggled for gains after both countries’ central banks announced monetary tightening on Thursday.
South Korea’s Kospi closed little changed at 2,716.71, while Singapore’s Straits Times Index fell 0.15% in afternoon trade.
The Bank of Korea on Thursday announced a 25 basis point hike in interest rates to 1.5%, a decision predicted by less than half of economists in a Reuters poll.
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Following the decision, the Korean won traded at 1,224.03 per dollar, still stronger than levels above 1,232 recorded against the greenback earlier this week.
In Southeast Asia, the Monetary Authority of Singapore also announced monetary tightening on Thursday, the third in the last six months.
Singapore’s central bank said it will re-center the midpoint of the exchange rate band, known as the Singapore dollar’s nominal effective exchange rate, to its prevailing level. The revaluation rate of the policy band will also “increase slightly”.
The width of the policy band was left unchanged. The MAS manages monetary policy by setting the exchange rate, not interest rates.
The Singapore dollar rose to 1.3538 per dollar after the MAS announcement, compared to levels above 1.364 recorded against the greenback earlier in the week.
JPMorgan Asset Management said in a statement that Singapore and South Korea, as net energy importers, “are not spared” from the impact of higher commodity prices, exacerbated by the Russia-Ukraine conflict.
“Although the inflation problem is not as severe as in many parts of the developed world, it is understandable that both central banks are trying to act pre-emptively,” said Clara Cheong, global market strategist at JPMorgan Asset Management.
“From a rate perspective, the MAS is likely a little tighter than expected, with the market now eyeing another potential move in October,” added Eugene Leow, Senior Rates Strategist at DBS Bank.
Currencies and Oil
The US Dollar Index, which tracks the greenback against a basket of its peers, came in at 99.599 after falling from above 100.4 recently.
The Japanese yen traded at 125.26 per dollar, stronger against the greenback above 125.6 yesterday. The Australian dollar traded at $0.7451 after recovering from levels below $0.744 recently.
Oil prices were lower in the afternoon of the Asian session, with international benchmark Brent crude futures falling 1.31% to $107.36 a barrel. US crude oil futures fell 1.48% to $102.71 a barrel.
— Correction: This article has been updated to clarify that Clara Cheong is from JPMorgan Asset Management. In a previous version, her title and organization were misrepresented in one case.