Most Asian stocks rose sharply on Wednesday as weak U.S. inflation data pushed up hopes of no more interest rate hikes, while a massive liquidity injection by China’s central bank also boosted risk appetite.
Technology stocks saw outsized gains, tracking their U.S. peers as the weak inflation data bought down Treasury yields.
This was accompanied by a 600 billion yuan ($82.7 billion) liquidity injection by the People’s Bank of China, as it left medium-term lending rates unchanged. The liquidity injection was aimed chiefly at shoring up sluggish economic growth by encouraging more lending in the country.
China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes rose 0.9% and 0.5%, respectively. Hong Kong’s Hang Seng index rallied 2.7% and was the best performer in Asia for the day, also benefiting from strength in heavyweight tech stocks.
The PBOC’s liquidity injection was accompanied by data showing some resilience in the Chinese economy, as industrial production and retail sales grew more than expected in October.
But other indicators still showed some weakness in the economy, as fixed asset investment slowed and property sales continued to decline.
“The general sense is that things are moving slowly in a more positive direction, but that the economy still needs the liquidity support that the PBOC seems to be starting to provide, and the slightly more helpful fiscal stance that the central government is taking,” analysts at ING wrote in a note.
Asian tech surges as weak CPI dents rate hike bets
Tech-heavy Asian bourses were the best performers for the day, with South Korea’s KOSPI up 2.1%, while Japan’s Nikkei 225 added 2.2%.
Futures for India’s Nifty 50 index also pointed to a positive open, particularly on strength in heavyweight tech stocks such as Infosys Ltd (NS:INFY) and Wipro Ltd (NS:WIPR).
Regional tech stocks tracked overnight gains in their U.S. peers, after data showed that U.S. consumer inflation grew less than expected in October. The reading ramped up hopes that the Federal Reserve will have little impetus to increase interest rates further.
This notion bought down Treasury yields, which were a major source of pressure on the tech sector this year.
Other Asian markets also logged strong gains. Australia’s ASX 200 surged 1.5% to a near two-month high, while Indonesian stocks led gains across Southeast Asia with a 1.5% rise.
Japanese shares rally as weak GDP feeds dovish BOJ bets
Japan’s Nikkei 225 was among the best performers for the day, rallying 2.2% despite a weaker-than-expected gross domestic product reading for the third quarter.
GDP shrank 0.5% against expectations for a drop of 0.1%.
But the reading highlighted the need for more supportive measures for the Japanese economy, and pushed up hopes that the Bank of Japan will further delay its exit from its ultra-dovish stance.
A dovish BOJ was one of the biggest factors behind a Japanese stock rally this year, given that it was among the few major central banks that was still keeping interest rates at ultra-low levels.
