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Most Asian stocks rose on Friday tracking dovish signals from the two largest central banks in the region, as the Bank of Japan maintained ultra-low interest rates and as the People’s Bank of China began trimming borrowing costs.
Still, bigger gains were limited as markets remained on edge over worsening economic trends and rising interest rates in the rest of the world, particularly the U.S.
The Nikkei 225 index in Japan climbed 0.2%, while the wider TOPIX recovered early losses, as the BOJ maintained ultra-low interest rates and signalled no change in its quantitative stimulus and yield curve management programmes.
The move suggests that Japanese monetary conditions would stay supportive in the short future, making domestic stocks seem significantly more appealing than their overseas counterparts.
Following a remarkable surge over the previous month, both the Nikkei and the TOPIX reached 33-year highs this week. Optimism in the Japanese economy contributed as well, with the BOJ forecasting rather good growth in 2023.
The Shanghai Shenzhen CSI 300 and Shanghai Composite indices in China climbed nearly 0.4% apiece on Friday, extending gains into a second consecutive day as the People’s Bank of China began lowering lending rates to encourage economic development.
The PBOC slashed short and medium-term rates this week, and its benchmark lending prime rate is largely expected to be trimmed on Tuesday. Following a spate of dismal April and May readings, the move comes amid mounting scepticism about a post-COVID Chinese economic recovery.
However, recent rate decreases, together with pledges of more supporting measures from the government, have raised expectations that the Chinese economy would improve in the second half of the year.
Optimism about China has spread to other vulnerable markets. The Hang Seng index in Hong Kong gained 0.8%, while the ASX 200 in Australia gained 0.8% due to gains in heavyweight mining firms.
The Nifty 50 and BSE Sensex 30 indices in India began approximately 0.4% higher, while the KOSPI in South Korea gained 0.5%.
Nonetheless, larger gains were restrained due to fears about increasing US interest rates and sluggish economic growth. The Federal Reserve held interest rates unchanged this week, but warned of at least two more rises this year to combat excessive inflation.
This was followed by a spate of dismal US economic data, heightening concerns about the Fed’s ability to continue raising rates.
