China’s support for its equities market and the Federal Reserve’s intent to raise interest rates again have added to Asian stocks being on the rise, with the US dollar weakening against most Group-of-10 currencies, an American news agency has reported.
The benchmark CSI 300 Index, listed on the Shanghai Shenzhen Stock Exchanges, was “on course for the biggest gains in more than a month,” while the Shanghai Composite Index “looked poised to rise the most since November,” according to the report.
Earlier on Monday, the CSI 300 and Shanghai Composite indexes both surged about 5.5%, while Hong Kong’s Hang Seng increased by 1.8%.
This came after China announced new measures to draw investors back into the country’s stock markets, which includes Beijing halving the stamp duty on stock trades and pledging to slow the pace of initial public offerings (IPOSs).
The Chinese Ministry of Finance said the measures’ goal is to “invigorate capital markets and boost investor confidence”. The China Securities Regulatory Commission, in turn, stated it will slow the pace of IPOs citing “recent market conditions,” without giving details on how it would do so.
The US news agency cited Khoon Goh, head of Asia research at Australia & New Zealand Banking Group in Singapore, as saying in this regard that Beijing’s move has raised hopes of a turnaround for China’s equities market.
“The last time the levy was cut was in 2008, which helped to spur a rally. Investors will be hoping for a repeat this time,” the analyst claimed.
Goh was echoed by China International Capital Corp. analysts including Pu Han, who in a note that “The scale, force and speed of the measures all beat expectations.The increasing force of the policy tools will lift market confidence, amplifying the positive signal for the market.”
The developments follow US Federal Reserve Chair Jerome Powell making it clear that the agency may need to raise interest rates further to stem inflation in the country.
“We will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data. It is the Fed’s job to bring inflation down to our 2% goal, and we will do so," he noted. Already, US interest rates have gone from near zero at the start of 2021 to 5%, the fastest rate hike since the 1980s.