HONG KONG, May 20 (ABC):Asian markets saw a sustained bump Friday following China’s decision to lower a key benchmark rate, injecting optimism among traders that it could boost the world’s second-largest economy from its Covid-battered knees.
Downcast earning reports from retailers this week have heightened uncertainty in the world markets at a time of rising interest rates, surging energy prices, China’s Covid lockdowns and Russia’s ongoing war in Ukraine.
Wall Street took a beating Thursday, adding to its very bad week as the markets reacted to back-to-back earnings misses from Walmart and Target which revealed difficulties managing rising costs, as well as weaker-than-expected Chinese economic data.
On Friday morning, China’s central bank announced it would lower its five-year loan prime rate — a key interest rate governing how lenders base their mortgage rates — from 4.6 percent to 4.45 percent.
The move will help reduce mortgage costs, serving as a boost for demand as China undergoes a property slump and its economy bleeds from stopped ports and factories due to Covid lockdowns.
It is “without doubt a positive in terms of raising the market’s sentiment,” Niu Chunbao, fund manager at Shanghai Wanji Asset Management, told Bloomberg.
Tokyo, Seoul, Singapore and Sydney all saw a sustained one percent boost, while Hong Kong’s Hang Seng led the rally — up by more than 3 percent in the afternoon.
A strong fiscal stimulus “is also expected” from the central government given persistent headwinds to growth, said Chaoping Zhu, a Shanghai-based global market strategist with JP Morgan Asset Management.
“In addition to the conventional approaches including infrastructure investment and tax deduction, direct subsidies or cash payout to consumers may be adopted to stabilize domestic demand and employment,” he said.
Data released this week from China showed the extent of economic pain inflicted by Beijing’s strict zero-Covid policy, with retail sales and factory production slumping to their lowest in over two years.
The unemployment rate also climbed in April to 6.1 percent — the highest in more than two years.