Asia report: Stocks rise as PBoC trims repo rates

Asia-Pacific stock markets closed in positive territory on Tuesday, as investors awaited key inflation data from the United States.

“Investors digested the news of the People's Bank of China (PBoC) cutting its seven-day reverse repo rate,” said Patrick Munnelly at TickMill Group.

“The Nikkei 225 outperformed, surging by 1.9% and surpassing the 33,000 handle for the first time in over three decades.

“This impressive performance was driven by strength in the automaker sector, as well as positive news surrounding SoftBank.”

Munnelly noted the announcement that Intel would discuss becoming an anchor investor in the Arm IPO, which boosted investor confidence.

“The Hang Seng and Shanghai Composite indices showed mixed results. Initially subdued, despite the PBoC's cut to its short-term interbank funding rate, both indices experienced limited movement.

“The prospects of a cut to the MLF rate and benchmark LPR raised cautious optimism, but ongoing growth concerns and tensions resulting from the US adding 43 entities to its export control list dampened overall sentiment.”

Stocks rise across the region

In Japan, the Nikkei 225 rose by 1.8% to close at 33,018.65, while the Topix index gained 1.16% to finish the day at 2,264.79.

Shares of Hitachi Zosen led the gains on Tokyo’s benchmark with a 5.75% surge, followed by SoftBank Group and Toyota Motor, which appreciated by 5.25% and 5.05% respectively.

Chinese markets also ended the day on a positive note with the Shanghai Composite slightly up by 0.15% at 3,233.67, and the Shenzhen Component gaining 0.76%.

Huadian Energy led the rally in Shanghai, posting a stellar 10.111% gain, while Guangdong Dcenti saw its shares rise by 10.06%.

Hong Kong's Hang Seng Index increased by 0.6% to 19,521.42.

Technology giant Lenovo Group's shares climbed by 5.61%, while Baidu and Country Garden Holdings increased by 4.86% and 4.76% respectively.

South Korea's Kospi edged higher by 0.33% to finish at 2,637.95, as SK Square and Hyundai Glovis were the top performers, with gains of 6.03% and 5.69% respectively.

In Australia, the S&P/ASX 200 rose marginally by 0.23% to close at 7,138.90, as Paladin Energy outperformed with a 9.35% rise, followed by AUB Group which climbed 6%.

New Zealand's S&P/NZX 50 ended the trading day 0.32% higher at 11,652.84, with Vista Group shares seeing an uptick of 3.36%, while Ebos' shares were up 1.85%.

In currency markets, the dollar was last down 0.01% on the yen to trade at JPY 139.58, while it slipped 0.4% on the Aussie to AUD 1.4755.

Against the Kiwi, it retreated 0.35% to change hands at NZD 1.6278.

In commodity markets, Brent crude futures were last up 2.16% on ICE at $73.39 per barrel, while the NYMEX quote for West Texas Intermediate increased by 1.92% to $68.41 per barrel.

China trims reverse repurchase rates by 10-basis points

In economic news, the People's Bank of China (PBoC) reduced its seven-day reverse repurchase (repo) rate by 10 basis points, from 2% down to 1.9%.

The move, the first of its kind since last August, entailed the injection of CNY 2bn through its seven-day repos into the economy.

Repurchase operations typically involve short-term borrowing, allowing financial institutions to obtain immediate liquidity.

“We think that the PBoC will guide down the medium-term lending facility (MLF) rate and both one-year and five year loan prime rates (LPRs) by 10-basis points this month,” said Duncan Wrigley at Pantheon Macroeconomics.

“The government is likely to approve a broad but limited fiscal and quasi-fiscal support package intended to keep growth ticking over in the second half.

“This probably will not be a major stimulus akin to China’s post-global financial crisis policies, but rather a set of measures intended to boost sentiment and refuel the flagging domestic demand recovery, alongside targeted measures for notably weak sectors like real estate and SMEs.”

Reporting by Josh White for Sharecast.com.