Chinese stocks rise for first time in four days on interest rate cuts comment by US Federal Reserve official

Chinese stocks closed higher for the first time in four days on Friday, following comments by a Federal Reserve official that suggested the US central bank would cut interest rates more aggressively than anticipated.

The Shanghai Composite Index rose 0.9 per cent to 2,924.2 at the close, snapping a three-day, 1.4 per cent losing streak. The gauge was down 0.2 per cent for the week. In Hong Kong, the Hang Seng Index added 1.1 per cent to 28,765.40.

Benchmarks across Asia, from Japan to South Korea and Taiwan, also gained after New York Fed President John Williams referred to the need for half point quick action when rates are already low. A spokesman for the official later clarified the remarks were not meant to suggest a significant cut in rates by the end of this month.

The Fed is widely expected to lower borrowing costs this month, compared with a 33 per cent probability of raising interest rates based on forecasts made in January, according to Bloomberg.

“Not only the Federal Reserve – central banks in emerging economies have also adopted accommodative policies,” said Dai Ming, fund manager at Hengsheng Asset Management in Shanghai. “So stocks are benefiting from a loose liquidity situation.”

Flat turnovers on Chinese stock gauges, however, might signal a rebound could be temporary, without much buying interest. The value of shares that have changed hands on the Shanghai bourse was 22 per cent below the 30-day average on Friday, while those on the smaller Shenzhen exchange were 18 per cent lower, according to Bloomberg.

Brokerages led a rally in the broader market just before a new technology board, the Start Market, starts trading on Monday. Twenty-five companies will debut on the stand-alone board on the Shanghai exchange. Chinalin Securities surged 6.5 per cent to 18.25 yuan and Great Wall Securities climbed 5.4 per cent to 15.75 yuan.

Poly Developments and Holdings Group jumped 6.1 per cent to 14.38 yuan for the biggest gain in about four months, after earnings growth at the property developer accelerated in the first half. In a preliminary earnings statement, the developer said net income for the first six months increased 59 per cent from a year earlier, because of higher project margins and increased investment gains. Growth for the first quarter was 23 per cent.

Stocks Blog: Finally, markets perk up

In Hong Kong, MTR, the operator of the city’s subway system, declined by 2.7 per cent to HK$52.20, its biggest drop since December 10, 2018.

The company will set aside HK$2.43 billion (US$311 million) for expected first-half losses associated with the Hung Hom workmanship incidents and First MTR South Western Trains, a unit in which MTR holds a 30 per cent stake, according to an exchange filing with the Hong Kong stock exchange.

The money set aside amounts to about 52 per cent of MTR’s 2018 first-half net income, the company said.