China Rate Cut Spurs Asian Rally

Arjun Pandit
20 May, 2022
New York City

Asian markets scaled higher after China unexpectedly lowered its mortgage reference rate hoping to revive the flagging housing market. 

The People's Bank of China held its one-year loan prime rate at 3.7% but lowered its five-year loan, reference rate for mortgage lending, to 4.45% from 4.60%. 

The rate was the largest since the rate structure was revised by the central bank in 2019 and was second after the rate was trimmed in January. 

In January, the central bank lowered one-year and five-year rates after home prices and sales fell. Home prices declined again in April compared to March. 

The latest rate cut follows the central bank's lowering of the mortgage rate floor for the first-time home buyers over the weekend. 

The central bank is looking to revive moribund housing market and spur more economic activities as the nation is struggling with Covid-19 stringent restrictions and lockdowns in many regions.

Stocks of builders changed little after the rate cut suggesting that the rate cut is not likely to help much. 

The Shanghai Composite Index gained 1.6% to 3,146.57 and the Hang Seng Index rose 3% to 20,717.24. 

Consumer price index in Japan rose 2.4% in April from a year ago and edged up 0.4% from March, the Ministry of Internal Affairs and Communications said today. 

Core prices excluding food and energy rose 2.1% from a year ago after rising at 0.8% in the previous month. 

Consumer price inflation is ahead of the central bank's target rate of 2% for the first time in seven years, driven by 8-year high imported energy prices. 

The Nikkei 225 index rose 1.3% to 26,739.0. 

In trading, Seiko Epson rose 8.8% t0 2,123 yen after the company announced to buy back shares. 

Isetan Mitsukoshi jumped 2.2% to 1,057 yen and Oriental Land Co advanced 2.3% to 18,345 yen on the hopes that the government is ready to relax restrictions on social and economic activities. 

The Bank of Korea said producer prices in South Korea rose 9.2% in April after rising at 9.0% in March. 

On a monthly basis the increase declined to 1.1% from 1.5% in the previous month.   

The Kospi index climbed 1.81% to 2,639.29 ahead of the U.S. President Joe Biden's visit to South Korea. 

In Australia stocks closed higher ahead of the federal election on Saturday with the Labor Party running ahead in polls but the lead has narrowed considerably in recent days.  

Of the 17 million people expected to vote, six million have already cast their ballot in early voting.  

The benchmark ASX 200 index rose 1.15% to 7,145.60 and closed up 1% for the week and first weekly gain in the last five weeks.