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Asian Shares Nudge Higher as Investors Await Further China Government Stimulus

James Hyerczyk

The major Asia Pacific stock indexes continued to recover from their steep sell-offs in January and the start of the new month on Wednesday, building on gains from the previous session.

Stocks were supported by liquidity moves from the People’s Bank of China (PBOC) earlier in the week and reports of a massive upcoming stimulus package from China’s government. Investors also followed the leads of Europe and Wall Street, which closed higher on Tuesday.

On Wednesday, Japan’s Nikkei 225 Index settled at 23319.56, up 234.97 or +1.02%. Hong Kong’s Hang Seng Index finished at 26714.59, up 38.61 or +0.14% and South Korea’s KOSPI Index closed at 2165.63, up 7.73 or +0.36%.

In China, the Shanghai Index settled at 2818.09, up 34.80 or +1.25% and Australia’s S&P/ASX 200 Index finished at 6976.10, up 27.40 or +0.39%.

People’s Bank of China Makes Some Moves to Prop Up Market

On Monday and Tuesday, China’s central bank lowered interest rates on reverse repurchase agreements to add money to the money supply to ensure adequate liquidity supply in the system. According to reports, the PBOC injected 1.7 trillion yuan (approx. $242 billion) into money markets.

On Wednesday, the PBOC said it decided not to conduct open market operations for the day because there was “adequate liquidity in the current banking system, which is sufficient to meet the market demand.”

Reuters Exclusive: China Readies More Measures to Stabilize Economy

Chinese policymakers are readying measures to support an economy jolted by a coronavirus outbreak that is expected to have a devastating impact on first-quarter growth, policy sources said.

With the death toll from the virus epidemic climbing to over 490 and risks to growth mounting, China’s central bank is likely to lower its key lending rate – the loan prime rate (LPR) – on February 20, and cut banks’ reserve requirement ratios (RRRs) in the coming weeks, said the sources who are involved in internal policy discussion.

In order to minimize job losses, China’s stability-obsessed leaders are likely to sign-off on more spending tax relief and subsidies for virus-hit sectors, alongside further monetary easing to spur bank lending and lower borrowing costs for businesses, according to the policy insiders.

Coronavirus Hits South Korean Auto Industry

Hyundai Motor will suspend production in South Korea because the coronavirus outbreak has disrupted the supply of parts, it said, becoming the first major carmaker to do so outside of China.

“Hyundai and Kia may be more affected as they tend to import more parts from China than other global automakers,” said Lee Hang-koo, senior researcher at the Korea Institute for Industrial Economics & Trade.

In China, global automakers have already extended factory closures in line with government guidelines. Those manufacturers include Hyundai, Tesla, Ford, PSA Peugeot Citroen, Nissan and Honda Motor.

Australian Shares Rise but Gains Capped at 7000

Australian stocks finished higher for a second session this week but could not sustain a move above 7000 as the death toll from the coronavirus outbreak in China neared 500.

The tech sector was the biggest gainer, up 2.0 percent, in a day in which bond prices fell. The mining sector saw the second-biggest gains, rising 1.0 percent. The big banks were mixed.

This article was originally posted on FX Empire