Asia report: China stocks rise, Bank of Korea hikes rates

Stock markets in mainland China turned in a solid performance on Wednesday on what was a mixed day for Asia, while the yen weakened even further.

In Japan, the Nikkei 225 was down 0.02% at 26,396.83, as the yen weakened 0.42% against the dollar to last trade at JPY 146.47.

Automation specialist Fanuc was up 0.25%, fashion firm Fast Retailing added 2.32%, and technology conglomerate SoftBank Group was ahead 0.9%.

The broader Topix index was off 0.12% by the end of trading in Tokyo, settling at 1,869.00.

On the mainland, the Shanghai Composite was up 1.53% at 3,025.51, and the technology-heavy Shenzhen Component jumped 2.46% to 10,838.48.

Fresh data out of Beijing showed banks in China making CNY 2.47trn of new loans in September - much more than the CNY 1.25trn extended in August.

It was also well above the CNY 1.8trn in new loans predicted by analysts in a Reuters poll.

The data from the People’s Bank of China came on the back of its attempts to light a fire under credit markets by unexpectedly lowering interest rates earlier in the year.

South Korea’s Kospi was 0.47% firmer at 2,202.47, while the Hang Seng Index in Hong Kong lost 0.78% to 16,701.03.

Korea’s central bank sated market expectations by hiking interest rates earlier in the day, as it worked to rein inflation back in and put a lid on the plunge in the won.

The Bank of Korea tacked 50 basis points onto its policy rate, taking it to the 3% that had been widely expected by markets.

“Further hikes are on the table, given the inflationary outlook,” said Craig Botham at Pantheon Macroeconomics.

“The BoK also hopes that continued hiking will help to stabilise the won by addressing the interest rate differential relative to the US.

“Governor Rhee avoided committing to 25- or 50-basis point hike at the next meeting, noting ‘high uncertainties’, but said that the Bank would base its decision on external conditions, including the November FOMC, UK financial markets, US CPI, and movements in international commodity prices, and their impact on domestic growth and inflation.”

Botham highlighted that two members dissented at the October meeting, and called for a 25-basis point hike.

“Growth, however, is also becoming a worry for the BoK, which we have accused of seeming blasé on the topic in the past.

“Domestic growth is expected to slow gradually, thanks to deteriorating external demand and the impact of higher interest rates; house prices are now falling, alongside household borrowing.”

GDP growth in 2023 was now expected to come in lower than the Bank of Korea’s August forecast of 2.1%, Botham added.

“Mr Rhee said that members of the BoK see the terminal rate as ‘around’ 3.5%, in line with our expectations for the first quarter of 2023, and implying that the rate cycle is nearing its end, despite all the talk about inflation and the won.

“Overall, this was a dovish 50-basis point hike from the Bank, which is now being forced to hike against its own inclinations by global pressures, rather than domestic dynamics.”

Seoul’s blue-chip technology stocks were on the front foot, with Samsung Electronics up 0.72% and SK Hynix jumping 4.21%.

Oil prices were higher at the end of the Asian day, with Brent crude futures last up 0.39% on ICE at $94.65, while the NYMEX quote for West Texas Intermediate increased 0.18% to $89.51.

In Australia, the S&P/ASX 200 eked out gains of 0.04% to 6,647.50, while across the Tasman Sea, New Zealand’s S&P/NZX 50 slipped 0.76% to 10,873.23.

The down under dollars were mixed against the greenback, with the Aussie last 0.22% weaker at AUD 1.5978, while the Kiwi strengthened 0.08% to NZD 1.7896.

Reporting by Josh White at Sharecast.com.