Asian stock markets surged on Wednesday on hopes that the US, the region’s biggest trading partner, would avoid a serious economic slowdown after the Federal Reserve slashed US interest rates by 50 basis points.
Hong Kong led the way with a 4 per cent jump, with the Hang Seng index breaking through the 25,000 barrier for the first time as local rates dropped in line with the Fed’s cut. Markets in Mumbai, Singapore, Seoul and Tokyo rose by more than 3 per cent. Indian shares also hit a lifetime high, with the benchmark index piercing 16,000.
The mood on the markets was “euphoric,” a senior trader in Singapore said. “The Fed pleasantly surprised us. Many people had expected a 25bp cut but 50bps was very welcome, especially as this may be the first in a series of cuts.”
Mainland Chinese markets failed to share in the good mood – “but they always seem to go in the opposite direction,” the trader said. The Shanghai Composite index lost 0.6 per cent to close at 5,395.27. However, Bank of Beijing made a strong debut in Shanghai, boding well for major listings due in coming weeks. The stock rose 81 per cent from its IPO price to Rmb22.68.
Hong Kong’s Hang Seng Index closed at 25,554.64, while the H-shares index of 43 mainland companies gained 3.5 per cent to a record high.
Tokyo shares rallied to two-week highs, with the benchmark Nikkei 225 closing up 3.7 per cent at 16,381.54 and the broader Topix index up 3.8 per cent at 1,567.58.
Bank shares rebounded from Tuesday’s losses, also helped by the Bank of Japan’s decision to keep interest rates unchanged at 0.50 per cent. MUFJ advanced 6.1 per cent to Y1.05m. Energy stocks were given a big boost as US crude oil futures probed new record highs above $82 a barrel. Inpex Holdings rose 8.9 per cent to Y1.2m.
In Australia, the S&P/ASX 200 made its biggest one-day gain in a month, rising 2.6 per cent to 6,536.10. Refreshed optimism about global growth boosted BHP Billiton, the world’s biggest miner, 4.6 per cent to close at a lifetime high of A$40.44. The prospect of cheaper credit lifted National Australia Bank 2.6 per cent to A$38.20. Rams Home Loans, one of the stocks hit hardest by the subprime turmoil, rose 6 per cent to 80 cents.
In India, the Bombay Stock Exchange Sensex 30 index was 3.6 per cent higher at 16,246 by early afternoon – a rise of 22.3 per cent since the beginning of the year. Software companies were big gainers. Around half their sales are to the US, and the Fed’s interest rate cut increased hopes that any slowdown in revenues would not be as bad as feared. Infosys was up 2.8 percent at Rup1,851 while Tata Consultancy gained nearly 2 per cent to Rup1,022.
South Korea’s Kospi breached the key 1900 barrier, adding 3.5 per cent to 1902.65, the highest finish since Aug. 9. In Singapore, the Straits Times Index rose 3.4 per cent to 3594.36.
The Fed’s deeper-than-expected cut in US interest rates caused the dollar to sag to a 15-year low against a trade-weighted basket of major currencies. The US Dollar Index hit 79.120.
The yen benefitted, strengthening by Y0.30 to Y115.77 against the dollar.
The high-yielding New Zealand dollar also rose on the Bank of Japan’s decision to keep rates steady. The Kiwi is a favourite of carry traders, who borrow in low-yielding currencies like the yen to invest in countries like New Zealand where interest rates are high. The New Zealand dollar rose by 0.37 US cents to 73.02 US cents.
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