Asian Stocks Extend Two-Month High as China Cuts Interest Rates

  • Benchmark equity gauge heading for best month since 2009
  • Hitachi shares surge in Tokyo, BlueScope soars in Sydney

What China's Rebalancing Means for Commodities

Asian stocks rose after China’s central bank cut its benchmark lending rate, stepping up efforts to cushion a deepening economic slowdown.

PetroChina Co. and liquor maker Kweichou Moutai Co. were the biggest boosts to Shanghai’s benchmark gauge. Hitachi Ltd. climbed 6.1 percent in Tokyo after lifting its profit forecast. BlueScope Steel Ltd. soared 11 percent in Sydney after Australia’s largest steelmaker agreed to buy the remaining 50 percent of its joint venture in the U.S. with Cargill Inc. for $720 million, giving the producer full ownership of North America’s most profitable mill.

The MSCI Asia Pacific Index gained 0.5 percent to 136.44 as of 12:36 p.m. in London after closing Friday at the highest since Aug. 19. The gauge climbed more than 10 percent this month as investors pushed back expectations for the first U.S. interest-rate increase and central banks signaled further measures will be enacted to stave off weak economic growth. On Friday, China said it would cut rates for the sixth time in a year, and lowered the amount of deposits banks must hold as reserves.

“The ongoing easing program is clearly aimed at supporting growth and as such, is a big positive,” said Shane Oliver, Sydney-based global strategist at AMP Capital Investors Ltd., which manages $113 billion. “Monetary conditions remain easy. This in turn should help see the global economic recovery continue.”

China Stocks

The Shanghai Composite Index climbed 0.5 percent. Hong Kong’s Hang Seng Index slipped 0.2 percent and the Hang Seng China Enterprises Index was little changed.

China’s one-year lending rate was cut to 4.35 percent from 4.6 percent, the People’s Bank of China said on its website on Friday, while the one-year deposit rate will fall to 1.5 percent from 1.75 percent. Reserve requirements for all banks were lowered by 50 basis points, with an extra 50 basis point reduction for some institutions.

CHINA

BOOST: Global stocks and commodities extended gains after the PBOC announced a reduction in interest rates.

Goldman Sachs Group Inc. estimated the easing will release 600 billion yuan to 700 billion yuan ($94 billion to $110 billion) into the financial system, helping keep borrowing costs down at a time of record capital outflows. The U.S. bank predicts reserve-requirement ratios will be lowered by another 50 basis points by year-end, though policy makers will seek to prevent the yuan from weakening.

The rebound in Chinese equities spurred by the government’s efforts to boost growth will probably fade as the measures underscore fundamental weakness in the economy, according to Barclays Plc, Blackfriars Asset Management Ltd. and BlackRock Inc.

Five-Year Plan

China’s Communist Party meets from Monday to map out a blueprint for 2016-2020 in an economy confronting an era of sub-7 percent growth for the first time since Deng Xiaoping opened the nation to the outside world in the late 1970s.

Japan’s Topix index gained 0.7 percent. The Bank of Japan and the Federal Reserve decide on monetary policy this week as central banks worldwide seek to revive slowing global growth and lackluster inflation. Traders see a 6 percent chance of a Fed rate increase this week, according to futures data compiled by Bloomberg.

South Korea’s Kospi index added 0.4 percent and Singapore’s Straits Times Index advanced 0.7 percent. India’s S&P BSE Sensex Index fell 0.4 percent and New Zealand markets are closed for a holiday. Australia’s S&P/ASX 200 Index was little changed.

E-mini futures on the Standard & Poor’s 500 Index were also little changed. The S&P 500 climbed 1.1 percent on Friday to cap a fourth weekly gain amid better-than-estimated earnings.

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