You are here

China: Shanghai surge leads rally in Asian shares

37240033 - 20_01_2016 - JAPAN STOCKS.jpg

[HONG KONG] Asian stocks rose on Tuesday, led by a surge in Shanghai, while the dollar edged higher as traders weighed the fallout from a likely US interest rate rise this summer.

Mainland Chinese shares closed up more than three percent, while Hong Kong, Tokyo and Seoul also rallied, although volumes were low after Wall Street and London were closed for public holidays.

The greenback was boosted by remarks from Federal Reserve chair Janet Yellen that the US could raise interest rates "in the coming months" if data from the world's top economy continues to improve.

Traders saw this as a vote of confidence in the US economy, which has remained resilient even after the Fed raised rates for the first time in almost a decade in December.

"US policy normalisation and its likely impact has remained a key theme for markets," Mark Smith, a senior economist with ANZ Bank New Zealand, told Bloomberg News.

"The dilemma facing the data-dependent Fed is that some US data does not look as strong as it once did, with manufacturing under the pump."

The prospect of an imminent US rate hike - traders now believe one is more likely than not in July - has seen the dollar post its best performance since September 2014 this month.

The greenback edged higher against the euro and yen on Tuesday, while Australia's currency jumped after upbeat trade data boosted hopes for the economy.

US oil prices pushed higher ahead of a closely watched Opec meeting this week, with the benchmark West Texas Intermediate adding 26 cents to US$49.59 by 0730 GMT. Global benchmark Brent dropped 12 cents to US$49.64.

In Shanghai, shares jumped after Goldman Sachs predicted Chinese equities could be added to the MSCI's global benchmark indices for the first time.

The US investment bank said there is now a 70 per cent likelihood mainland shares will be included after changes to trading rules this month - a decision Bloomberg News said could attract some US$16 billion of investment flows.

"The market is expecting that mainland shares will have a pretty high chance of joining the MSCI's global indexes next month," Wang Zheng, chief investment officer at Jingxi Investment Management, told the news agency.

Tokyo shares, meanwhile, notched their fifth session of gains - the longest run this year - after reports Prime Minister Shinzo Abe could delay a planned tax hike.

Japan was scheduled to raise the sales tax from eight percent to 10 per cent in April 2017, but weekend comments by Mr Abe suggested he could push it back by two and a half years.

Lacklustre industrial production and household spending data released Tuesday reinforced predictions the government would delay a levy hike to avoid hurting the fragile economy.

Finance Minister Taro Aso fuelled expectations when he said weak spending showed raising the consumption tax would be a mistake, while local media reported Tokyo could also be planning another stimulus package.

"Investors are reacting positively to the prospect of a sales tax delay and an additional fiscal package," Masayuki Otani, chief market strategist at Securities Japan, told Bloomberg News.

"The fact that Aso has individually commented on this has a large impact."

In early European trade, London's FTSE 100 index advanced 0.2 per cent after a long weekend, Frankfurt's DAX 30 index was up 0.2 per cent and the Paris CAC 40 put on almost 0.1 per cent.