China May Unveil More Policies to Bolster Growth

“At present, we do have some external pressures, but those external pressures will help us boost our self-reliance in innovation and accelerate the pace of high-speed development,” said Liu, who is also the lead negotiator in the U.S.-China trade talks.
James Hyerczyk
China Economy

The major Asia-Pacific region stock indexes are trading mixed early Friday, showing little reaction to the jump in crude oil prices that drove the U.S. energy sector higher the previous afternoon. The catalyst behind that move was an attack on two tanker ships in the Gulf of Oman.

The price action on Friday suggests the move in the U.S. may have been an overreaction to the events since they did not lead to an actual supply disruption. Additionally, some traders feel that it is going to take an actual military conflict in the region between the United States and Iran to cause another short-term spike in crude oil prices, or a prolonged supply driven rally.

At 04:57 GMT, Japan’s Nikkei 225 Index is trading 21105.70, up 73.70 or +0.35%. Hong Kong’s Hang Seng Index is at 27153.63, down 141.08 or -0.52% and South Korea’s KOSPI Index is trading 2096.09, down 7.06 or -0.34%.

In Australia, the S&P/ASX 200 Index is trading 6556.60, up 14.20 or +0.22% and in China, the Shanghai Index is at 2903.15, down 7.59 or -0.26%.

Unrest Continues in Hong Kong, Potential Escalation Over Weekend

Politically-driven turmoil in Hong Kong continued to weigh on the Hang Send Index early Friday. Some investors are saying the situation is likely to escalate over the week-end, which likely means further weakness in the index next week.

Protesters continue to call on the government to drop a proposed change to the city’s extradition rules. Legal experts are saying the proposed extradition law could jeopardize a special economic agreement Hong Kong has with the United States. Furthermore, both the United States and European Union have released statements saying they share concerns about the potential legal amendment.

Some international banks in Hong Kong’s Central District have suspended branch services and permitted staff to work from home. Additionally, some experts are saying the unrest may damage Hong Kong’s reputation as an international financial center.

China’s Vice Premier Calls for More Measures to Support Economy

On Thursday, China’s Vice Premier Liu said Chinese regulators should step up support for the economy and keep ample liquidity in the financial system. This may have been a strong hint that Beijing would soon unveil more policies to bolster growth amid rising U.S. trade pressure.

“At present, we do have some external pressures, but those external pressures will help us boost our self-reliance in innovation and accelerate the pace of high-speed development,” said Liu, who is also the lead negotiator in the U.S.-China trade talks.

Liu’s comments sounded like a follow-up to a similar statement made by People’s Bank of China chief Yi Gang last week. He said there was “tremendous” room to make policy adjustments if the trade war worsens.

“We have plenty of room in interest rates, we have plenty of room in the required reserve ratio rate, and also for the fiscal, monetary policy toolkit, I think the room for adjustment is tremendous,” Yi said.

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