Mainland China Markets Rise as a Private Report Reveals a Slight Increase in Industry Activity

Posted by Devanny August 1, 2022
RBI rate increase
  • On Thursday, most Asian-Pacific stock prices rose.
  • A private sector survey released on Thursday revealed that the services sector in China continued to shrink in April. The Caixin services Purchasing Managers’ Index (PMI) dropped from March’s reading of 42 to 36.2 for April.
  • To market forecasts, the U.S. Federal Reserve raised its benchmark interest rate by 0.5 percentage points on Wednesday.

In Singapore, Following the widely anticipated decision by the U.S. Federal Reserve to raise rates by half a percentage point overnight — its largest increase in two decades — shares in the Asia-Pacific region were generally higher on Thursday.

As they resumed trading after a few days of vacation, mainland Chinese stocks ended the day in the black. The Shenzhen component increased 0.226 percent to 11,046.38, while the Shanghai composite increased 0.68 percent to 3,067.76.

A private sector survey released on Thursday revealed that the services sector in China continued to shrink in April. The Caixin services Purchasing Managers’ Index (PMI) dropped from 42 in March to 36.2 in April.

Growth and contraction are distinguished in PMI readings by the 50-point threshold. Sequential PMI numbers show growth or decrease from month to month.

Data made public over the weekend also revealed a decline in Chinese industry activity in April due to the impact of COVID lockdowns on industrial production.

In the last hour of trade, the Hang Seng index in Hong Kong entered the red, losing almost 0.1 percent. JD.com and Bilibili stock prices increased by 1% and 2.55 %, respectively. The U.S. Securities and Exchange Commission has put the two companies on a list of corporations at risk of being delisted from American exchanges.

In Australia, the S&P/ASX 200 increased 0.82 percent to settle at 7,364.70. The largest MSCI index of Asia-Pacific shares outside of Japan increased by around 0.7%.

On Thursday, all markets in South Korea and Japan were closed.

In PMI assessments, the 50-point threshold separates expansion from contraction. Sequential PMI numbers reflect growth or contraction from one month to the next.

Data made available over the weekend also showed that Covid lockdowns, which hampered industrial productivity, contributed to a decline in Chinese industry activity in April.

In the final hour of trading, the Hong Kong Hang Seng index lost over 0.1 percent, turning negative. JD.com and Bilibili shares both saw gains of 1.5 and 2.55 percent, respectively. The US Securities and Exchange Commission has placed the two companies on a list of entities that run the possibility of being delisted from US exchanges.

The S&P/ASX 200 index of Australian stocks increased 0.82 percent to close at 7,364.70. The MSCI, the largest non-Japanese share index for Asia-Pacific, rose by almost 0.7 percent.

In South Korea and Japan, all markets were closed on Thursday.

Currency and crude oil

The U.S. dollar index, which compares the dollar to a basket of its competitors, fell from above 103 recently and was at 102.822.

The price of the Japanese yen against the dollar traded at 129.52, up from yesterday’s highs of over 130. After reaching a high of $0.7266, the Australian dollar was traded at $0.7215.

The price of international benchmark Brent crude futures increased by 0.23 percent to $110.39 per barrel in the afternoon of Asian trading hours. The price of U.S. oil futures increased slightly to $107.88 a barrel.

TICKER COMPANY NAME PRICE CHANGE %CHANGE
.N225
 Nikkei 225 Index *NIKKEI 27993.35 191.71 0.69
.HSI
 Hang Seng Index *HSI 20165.84 9.33 0.05
.FTFCNBCA
 CNBC 100 ASIA IDX *CNBC 100 8185.8 46.64 0.57
.AXJO
 S&P/ASX 200 *ASX 200 6993 47.8 0.69
.SSEC
 Shanghai *SHANGHAI 3259.96 6.72 0.21
.KS11
 KOSPI Index *KOSPI 2452.25 0.75 0.03

Fed increases rates

To market forecasts, the U.S. Federal Reserve raised its benchmark interest rate by 0.5 percentage points on Wednesday. The central bank also described a plan to eventually reduce its monthly bond holdings by $95 billion.

Even while he stated that a 75 basis point rise is “not something the committee is actively discussing,” Fed Chair Jerome Powell reiterated the Fed’s commitment to lowering inflation.

Following the Fed’s decision, Wall Street markets surged overnight, with the S&P 500 climbing by about 3% to 4,300.17. To reach 34,061.06, the Dow Jones Industrial Average rose 932.27 points or 2.81 percent. To 12,964.86 the Nasdaq Composite rose 3.19 percent.

Lavanya Venkateswaran, an economist at Mizuho Bank, noted in a note that “the market rise was put in motion by the push back on a 75bp raise from the US Fed Chair Powell.”

“The market reaction does not take away from the hawkish Fed objectives,” said Lavanya, mostly highlighting a repricing from the aggressive rate rises factored in.

RBI rate increase

As of 12:53 p.m. local time, the Nifty 50 in India increased by 1.26 percent, and the BSE Sensex increased by roughly 1.3 percent. Following an off-cycle monetary policy meeting, the Reserve Bank of India raised its key lending rate.

The repo rate, which is the rate at which the RBI loans to commercial lenders, was hiked by the Indian central bank on Wednesday from 4% to 4.44%.

The most recent print of inflation in India was 6.95 percent, and Suresh Tantia, the senior investment strategist at Credit Suisse’s Asia-Pacific CIO Office, predicted that inflation would reach 7.5 percent in the following month.

He said on Thursday on CNBC’s “Squawk Box Asia” that it was “high time RBI took action and tightened monetary policy to manage the inflation.”

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