BENGALURU: China stocks rose on Monday on the back of Lunar New Year travel spending data as trade resumed after the holiday, while other regional equity markets and currencies held steady with some focus on policy rate decisions this week in Indonesia and South Korea.
Stocks in Shanghai rose as much as 1.3% to their highest level in three weeks. Monday’s gains brought year-to-date losses down to about 2.8%, but China remains the worst performer among Asian equities.
The blue-chip CSI 300 Index rose 0.5%, while the yuan was largely steady at 7.196 per US dollar.
Data showed that tourism revenues in China during the Lunar New Year holiday rose 47% year-on-year and surpassed 2019 levels, although revenues per trip were below pre-pandemic levels. China’s central bank left a key policy rate unchanged as expected.
“Given reports that parts of China’s demand were strong during the Lunar New Year holidays, namely tourism and spending... the question is whether sentiment is set to shift onto a better footing,” HSBC analysts wrote in a research note.
“So, China’s near-term growth and sentiment outlook will be very important for the FX market in the coming weeks,” they said.
Investors are waiting to see if China’s government rolls out new stimulus measures to try to sustain the rebound in the country’s stock market.
Shares in South Korea rose as much as 1.3% to their highest in 20 months. Equities in Singapore rose 0.3% to a seven-week high, while the Philippines retreated 0.5%.
Equities in Bangkok rose 0.3% after data showed Thailand’s economy unexpectedly contracted in the fourth quarter of 2023 from the third, adding to pressure for an interest rate cut.
Regional currencies were subdued as the dollar held steady after US inflation data last week cast doubts on how quickly the Federal Reserve would cut rates, with traders now betting on June.
Investors will be watching for Bank Indonesia (BI) and Bank of Korea rate decisions this week.
Economists in a Reuters poll expect BI to keep its key policy rate unchanged on the back of subdued inflation and an improving currency outlook.
They also predicted the first rate cut would come in the next quarter, and saw a limited impact from the country’s presidential election last week. Unofficial vote counts show Defence Minister Prabowo Subianto probably won outright.
“Currency and bond market stability will be the main considerations in the coming months... Armed with political stability, the central bank is likely to be focused on global developments,” DBS analysts wrote in a client note.
They also expect policymakers to be wary of a prematurely dovish turn, as markets continue to reassess their Fed rate-cut bets.