Stimulus Injection and Reserve Ratio Reductions Spark Rally in Nikkei 225 and Chinese Stocks

Hong Kong and mainland stocks surged for a second day as traders continued to cheer on Beijing’s fresh stimulus injection. The Hang Seng Index jumped 2.2 percent to 19,417.78 as of 10.05am local time, a four-month high, while the Tech Index surged 2.3 percent. A gauge tracking the biggest mainland companies advanced 3 percent following its biggest single-day jump since 2020.

Leading gains among market heavyweights in Hong Kong, Tencent Holdings jumped 2.4 percent to HK$411.80, e-commerce operator JD.com gained 2.7 percent to HK$128 and insurer AIA advanced 3.3 percent to HK$61.60. On the mainland, EV maker BYD rallied 4.2 percent to 265.30 yuan, distiller Kweichow Mao-tai jumped 2.9 percent to 1,412.92 yuan and battery maker CATL surged 4.5 percent to 206.50 yuan.

A rally in the offshore Chinese yuan continued, with the exchange rate surpassing the key threshold of 7 yuan per US dollar for the first time since May 2023. A slew of stimulus measures by the People’s Bank of China to prop up the world’s second-largest economy, including a US$114 billion stock market rescue plan, policy rate cuts and reserve-ratio reductions, have convinced more investors that Beijing is serious about tackling the slump.

“Chinese stocks are gobbling up these stimulus efforts like they’re at an all-you-can-eat buffet,” said Stephen Innes, managing director at SPI Asset Management. “The move has lit a temporary fire under investors, injecting much-needed adrenaline into the local market.” In another boost to the market, the central bank on Wednesday lowered the one-year medium-term lending facility (MLF) – the interest for one-year loans to financial institutions – to 2 percent from 2.3 percent.

Other key Asian markets advanced, buoyed by China optimism. Japan’s Nikkei 225 and South Korea’s Kospi both added 0.2 percent, while Australia’s S&P/ASX 200 gained less than 0.1 percent.