Asian shares rose as Chinese shares rose, amid news that policymakers are considering new rescue measures to stabilize the declining market.
The index of Chinese companies listed in Hong Kong jumped as much as 3.8%, while the mainland CSI 300 index erased early losses to rise 0.3%. Bloomberg News reported on Tuesday that the authorities are seeking to mobilize about two trillion yuan ($278 billion), most of it from the external accounts of Chinese state-owned companies, as part of a fund that supports market stability by purchasing local stocks. At least 300 billion yuan of local funds have also been allocated to invest in local stocks.
This development came in the wake of Chinese Premier Li Qiang's pledge, yesterday, Monday, to use more forceful measures to halt the decline in stocks in the country.
The yuan fluctuated as it sought to make gains against the dollar.
A potential support package should be able to stem short-term declines and stabilize markets in the Lunar New Year, but government purchasing alone has historically had limited success in changing market sentiment if not followed by more measures, said Marvin Chen, a Bloomberg Intelligence analyst. .
Interest in Japan
Elsewhere in Asia, Japanese stocks looked set for a third straight day of increases, while stocks in South Korea and Australia also rose.
In Japan, the central bank is expected to keep its key monetary policy settings unchanged on Tuesday. Attention will turn to how Governor Kazuo Ueda assesses progress towards achieving sustainable inflation needed to end negative interest rates. The yen price was stable.
Ongoing concerns about Chinese stocks stand in stark contrast to what's happening in the United States, where investors weigh strong economic signals and corporate earnings prospects. Wall Street stocks are coming off a rocky start to the year on bets that the Federal Reserve will cut interest rates and that the artificial intelligence boom will continue to fuel earnings growth.
The S&P 500 was hovering near 4,850 on Monday. Treasury bonds were flat in early Asian trading after 10-year bond yields fell by two basis points to 4.10% yesterday. The dollar did not witness a significant change.
Bet on the Fed
“The story is changing for the bulls,” said David Donabedian, of CIBC Private Wealth in the US. He added: Investors' optimism was driven by the belief that there would be significant interest rate cuts by the Federal Reserve. Now investors have come to view the economy as unbreakable. No matter how high interest rates get, the economy will continue to move properly.
The record close for stocks in the US last week sent valuations soaring to the highest levels seen last July. But a closer look shows the market is not as high as it seems, according to Scott Krohnert of Citigroup.
Gains achieved by Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta Platforms, and Tesla reinforced the return to prominence of Wall Street.
The equal-weighted S&P 500 index, which excludes the significant influence of some stocks, trades at a P/E of 16 times future earnings, which represents a 17% discount to the benchmark index's P/E.
The rise of artificial intelligence
“With artificial intelligence remaining the theme driving global technology stocks again this year and the rest of the decade, we maintain our preference for the semiconductor and software sectors and see opportunities in memory and intelligence-based peripheral computing,” said Solita Marcelli of UBS Global Wealth Management. Artificial.
Even as the S&P 500 closed Friday at an all-time high, money managers and analysts were still faced with data suggesting the US economy was resilient, and Federal Reserve officials opposed to cutting interest rates too early.
The latest warning for investors unleashing pessimistic monetary bets across the board came in a Bloomberg Markets Live Pulse poll, with two-thirds of respondents saying that betting on early monetary easing is the most foolish of the popular trades heading into 2024. .
Earnings season begins this week, with companies including Netflix, Tesla and Intel set to report results.
