China Cuts 5-year Loan Rate to Revive Property Market, Asian Markets Drift Lower

Arjun Pandit
20 Feb, 2024
Mumbai

Asian markets traded down amid global interest rate worries and persistent weakness in Chinese markets amid growing tensions with the U.S. 

Market indexes in Tokyo, Shanghai, Hong Kong, Mumbai, and Seoul traded down after U.S. Treasury yields edged higher. 

Moreover, the latest rate cut by China failed to support market enthusiasm because investors are looking for stronger measures and long-term policy measures to support the property market and lift consumer sentiment. 

European markets closed down in lackluster trading in Monday's trading, and the U.S. financial markets were closed to celebrate President's Day. 

Market sentiment in Asian markets was cautious after U.S. Treasury yields spiked higher. 

 

Tokyo Stocks Drifted Lower Amid Weakness In Banks and Tech Stocks

The Nikkei index decreased 0.1% to 38,413.66, and the benchmark index traded just below a 34-year high as investors reassessed the possibility of a near-term rate cut. 

The Bank of Japan has been sending mixed signals, but most investors are hoping that the central bank is ready to end its ultra-loose monetary policy after the end of wage negotiations at large corporations over the next two months. 

Tech stocks were among the leading gainers, and Screen Holdings, Advantest, and Tokyo Electron gained between 0.5% and 4.0%. 

Banks were in focus for the second week in a row after investors scaled back bets on the end of ultra-loose monetary policy. 

Banks are likely to be big winners as interest rates rise, lifting the net interest rate margin. 

Mitsubishi UFJ, Sumitomo Mitsui Financial, and Mizuho Financial decreased between 0.5% and 1.5%. 

Three leading automobile exporters, Honda Motor, Toyota Motor, and Nissan, traded mixed after the yen rebounded to above 150 against the U.S. dollar. 

Fanuc and Yaskawa Electric jumped more than 3%. 

 

China Lowered Rates to Spur Property Market

China lowered its interest rate for the first time since June 2023, hoping that the lower rate may revive the moribund property market. 

The People's Bank of China lowered its 5-year loan prime rate by 25 basis points to 3.95%, the largest cut since the rate was introduced in 2019.

Just a few days ago, China held its one-year loan prime rate at 3.45%, and both one-year and 5-year rates are at record low levels. 

The CSI 300 index decreased 0.4% to 3,389.40, and the Hang Seng index dropped 0.1% to 16,134.47. 

China also offered about 160 billion yuan, or $22.2 billion, to local developers and supported the completion of housing projects, the state-controlled broadcaster CCTV reported Tuesday. 

Despite the record low interest rates, property market confidence remains weak due to worries about a lack of large stimulus from the government and long-term measures to revive market confidence. 

Longfor Group rose HK$9.03, China Vanke advanced 0.7% to $6.17, and China Resources Land decreased 2.8% to HK$24.15. 

Electric vehicle makers were among the leading decliners after BYD lowered prices on plug-in hybrid cars by 20% for its new models. 

The lower price by the industry leader is likely to spark another round of cuts by other players. 

BYD declined 3.8% to HK$179.30, Li Auto fell 1.4% to HK$123.0, and Geely Automobile Holdings dropped 2.2% to HK$7.92. 

 

FDI In China Eased Second Consecutive Year

Foreign direct investment in China declined for the second year in a row, the State Administration of Foreign Exchange reported Sunday. 

Rising tensions with the U.S. and the arbitrary spying charges on foreign companies by Chinese authorities have kept many from investing in China. Foreign direct investment dropped 80% from the previous year to $33 billion in 2023. 

The foreign direct investment declined for the second year and dropped to 10% of $344 in 2021. 

 

India Stocks Struggled to Advance After Mixed Earnings Season

Stocks in Mumbai traded lower, the bond yield edged higher, and the Indian rupee held firm in Tuesday's trading. 

The Sensex and the Nifty indexes traded down as investors reviewed the last batch of fiscal third quarter earnings results over the last week. 

The Sensex index decreased 73.10 points to 72,634.99, and the Nifty index fell 44.55 points to 22,077.70.

On the Mumbai stock exchange, 178 stocks traded at their 52-week highs and 2 stocks traded at their 52-week lows.

The yield on the 10-year Indian government bonds increased to 7.10%, and the Indian rupee strengthened to ₹83.10 against the U.S. dollar.