Asia-Pacific Stocks – China Shares Surge after PBOC Tweaks Rule, Investors Bet on Steady Recovery

The major Asia-Pacific stock indexes were mixed but mostly higher early Monday with investors keeping an eye on U.S. fiscal stimulus negotiations, and the Chinese Yuan’s movements.

The big gain was in China’s Shanghai Index, followed by Hong Kong’s Hang Seng Index. While shares in Australia struggled, they remained positive, but in Japan, the Nikkei 225 bucked the trend, moving lower.

In the cash market at 03:47 GMT, Japan’s Nikkei 225 Index is trading 23543.95, down 75.74, or -0.32%. Hong Kong’s Hang Seng Index is at 24529.51, up 410.38 or +1.70% and Hong Kong’s Hang Seng Index is trading 2402.66, up 10.70 or +0.45%.

In China, the Shanghai Index is trading 3346.26, up 74.19 or +2.27% and in Australia, the S&P/ASX 200 Index is at 6112.70, up 10.50 or +0.17%.

China Gains Hoist Asian Stocks to Two-Year Peak

Chinese stocks led Asian markets higher on Monday as investors bet on a steady recovery for the world’s number two economy, though caution about the fate of U.S. stimulus kept the dollar firm and a central bank policy tweak unwound some of the Yuan’s gains.

China has returned from an eight day Mid-Autumn festival with investors encouraged by a robust rebound in tourism and ebbing coronavirus cases.

People’s Bank of China Announces Rule Change

Investors will monitor the Yuan’s movement on Monday, after the People’s Bank of China announced a rule change that made it cheaper to short the Yuan.

The central bank announced Saturday that financial institutions now no longer need to set aside cash when conducting some foreign exchange forwards trading, with effect from Monday. Previously, financial institutions had to set aside 20% of the previous month’s Yuan forwards settlement amount as foreign exchange risk reserves, according to Reuters.

South Korea Stocks Gain for Eighth Day on US Stimulus Hopes

South Korean shares rose for the eighth straight session on Monday, as U.S. stimulus hopes lifted investor sentiment. The won hit a more than over one-year high, while the benchmark bond yield also gained.

The Trump administration on Sunday called on Congress to pass a stripped-down coronavirus relief bill, as negotiations on a broader package ran into resistance.

“The KOSPI opened up, tracking gains in the U.S. market on hopes of additional stimulus… though investors will keep an eye on U.S. corporate earnings and political uncertainties,” said Kiwoom Securities analyst Seo-Sang-young.

Australia Shares Inch Higher as Investors Await Earnings, Production Results

Australian shares inched higher on Monday as investors stayed away from making big bets ahead of corporate earnings and production results while awaiting further developments on U.S. stimulus talks.

A slew of Australian companies, including global miners BHP Group and Rio Tinto, are scheduled to report their quarterly production figures later this week, while the ‘big four’ banks will provide the first peek into how lenders fared in the July-September quarter later this month.