Chinese shares rally after Fed chief Powell says that a rate cut is 'not far' off
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HONG KONG (AP) — Chinese shares rallied Friday on hopes that a rate cut by the Federal Reserve might relieve pressure on the Chinese yuan and attract more foreign investment in the markets.
The Hang Seng Index added 0.8% to 16,353.39, led by the tech index, which advanced 1% as senior Chinese officials showcased plans to focus on supporting research and industries to attain breakthroughs in key technologies, including computer chips, during the National People’s Congress.
Other major China indexes swung between small losses and gains throughout the day. The Shanghai Composite Index gained 0.6% and ended at 3,046.02, and the smaller market in Shenzhen rose 1.1%.
On Thursday, Federal Reserve Chair Jerome Powell said the central bank is “not far” from delivering the cuts to interest rates that Wall Street craves so much. He added that the Fed was waiting for the appropriate time.
“We’re waiting to become more confident that inflation is moving sustainably at 2%,” Powell said.
Better-than-expected trade data released Thursday suggested increased demand for Chinese exports.
Customs data showed exports in January-February rose 7.1% from a year earlier, up from a 2.3% rise in December. Imports rose 3.5%, compared to 0.2% growth in December.
Despite troubles in the property market, mounting local government debts, and geopolitical tensions, such data support Beijing’s efforts to rev up the economy.
“The robust performance in overseas shipments may provide some semblance of relief amid persistently subdued domestic demand,” Stephen Innes of SPI Asset Management said in a commentary. “However, China cannot depend solely on international markets to purchase inexpensive goods to salvage its economy.”
E-commerce giant Alibaba Group Holding gained 1%. NetEase was up 2.5% and Tencent lost 0.2%.
On the losing side, video-sharing platform Bilibili slipped by 2.6% after the company’s financial report showed a net loss of 1.297 billion yuan ($180 million dollars) in the fourth quarter of 2023, narrowing by 13% compared to the same period last year.
Striking an ominous note, a report by S&P Global said China’s credit rating may face a downgrade if the country's economic recovery remains fragile or heavily reliant on extensive stimulus measures.
The S&P’s most recent downgrade of China happened in 2017, but Moody’s, a competing agency, placed Beijing on a 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 plans to expedite a vote on legislation that would require TikTok’s parent company, ByteDance, to divest from the app within six months or face a U.S. ban. TikTok has around 170 million U.S. users, and efforts to ban the application have been ongoing since 2020, during the administration of former US president Donald Trump.
In the bond market, China’s central bank conducted 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 said in a statement that the move was designed to keep liquidity in the banking system.
