Fed, BOJ Policy Decisions Lift Asian Shares; Unrest Sinks Hong Kong Market

The major Asia Pacific stock indexes are mostly higher in the wake of interest rate and policy decisions from the U.S. Federal Reserve and the Bank of Japan.
James Hyerczyk
Japanese Stock Market

In Hong Kong, stocks were down for a fourth session amid lingering worries over protests. In China, investors were watching a key domestic rate decision that could offer more clues on Beijing’s easing policy.

At 06:49 GMT, Japan’s Nikkei 225 Index is trading 22044.45, up 83.74 or +0.38%. Hong Kong’s Hang Seng Index is at 26450.41, down 303.71 or -1.14% and South Korea’s KOSPI Index is trading 2078.59, up 7.86 or +0.38%.

China’s Shanghai Index is trading 2991.27, up 5.61 or +0.19% and Australia’s S&P/ASX 200 Index is at 6717.50, up 35.90 or +0.54%.

Central Bank Activity

Throughout the Thursday’s session investors reacted to a series of recent moves by central banks across the globe.

In the U.S., the Federal Reserve cut its benchmark rate by 25 basis points to a range of 1.75% to 2.00%, as widely expected. The Fed was, however, divided in its decision to lower rates, with three officials dissenting. Central bank officials were also split on further action this year.

Following the Fed decision, the Hong Kong Monetary Authority announced Thursday it adjusted its base-rate downward by 25 basis points to 2.25%. “The decrease in the Base Rate follows the 25-basis point downward shift in the target range for the US federal funds rate on 18 September (US time),” according to the Hong Kong Monetary Authority.

The Bank of Japan (BOJ) kept monetary policy steady on Thursday. In an expected move, the BOJ maintained its short-term interest rate target at -0.1% and a pledge to guide 10-year government bond yields around 0%.

In its statement on monetary policy, the Japanese central bank said “it is becoming necessary to pay closer attention to the possibility that the momentum toward achieving the price stability will be lost,” in reference to the BOJ’s ever elusive 2% inflation target.

“The Bank will reexamine economic and price developments at the next (Monetary Policy Meeting), when it updates the outlook for economic activity and prices,” the BOJ said.

Later today, central banks in Taiwan and Indonesia will release their interest rate and policy decisions. There is also speculation that the People’s Bank of China (PBOC) will further lower its Loan Prime Rate on Friday in response to the Fed’s rate cut.

Asia Pacific Economic News

The Australian Dollar took a hit on Thursday as expectations for more central bank cuts jumped after a report showed an unexpected rise in the unemployment rate.

New Zealand’s gross domestic product (GDP) rose by 0.5 percent over the June quarter, for a 2.1 percent gain over the same quarter of last year, but in line with a general slowdown in economic activity.

The gain compares with a 0.6 percent rise in the March quarter, which made for a quarter-on-quarter rise of 2.5 percent.

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