Asian stocks digest US banking woes, China outperforms

© Reuters

By Ambar Warrick — Asian stocks edged higher on Monday as markets gauged the potential fallout from a U.S. banking crisis, while Chinese indexes outperformed as the government promised more support for the economy.

China’s and indices rose about 0.8% each, while Hong Kong’s index rose more than 2% after new Premier Li Qiang sought to reassure the private sector with the promise of easier policies and that the government will ensure its annual economic projections is fulfilled.

Li’s appointment came as Xi Jinping was officially elected as president for a third consecutive term. The president also retained his top finance and commerce ministers, including People’s Bank Governor Yi Gang.

The move helped reassure investors that China’s post-COVID-19 reopening is likely to remain on course, potentially heralding a bigger economic recovery this year. But readings on the economy have so far painted a mixed picture of a recovery.

Still, Chinese real estate stocks fell after heavyweights Country garden Holdings Company Ltd (HK: ) warned of a bumper loss in 2022 due to a slowdown in the sector.

While a Chinese recovery bodes well for broader Asian markets, markets were largely focused on a looming banking crisis in the United States following the collapse of Silicon Valley Bank (NASDAQ: ) and its seizure by regulators.

Bank-heavy exchanges such as Australia’s and Japan’s fell 0.5% and 1.6% respectively. Malaysia also fell 0.9 per cent.

US regulators intervened over the weekend to calm markets and stem major fallout from the collapse.

But the prospect of more ructions in the US banking sector meant markets were pricing in a greater chance that the Federal Reserve will tone down its hawkish rhetoric in the coming months. Most Asian shares advanced slightly on this view, with tech-heavy bourses such as South Korea’s and the index adding 0.3% and 0.2% respectively.

showed a greater chance that the Fed will hike by 25 basis points next week, down from expectations for a 50 bps hike. The focus is now on an emergency meeting called by the Fed later in the day, as well as (CPI) inflation data expected on Tuesday.

India’s and indexes rose about 0.2% as gains in heavyweight tech stocks offset heavy losses in banks. The focus is also on Indian data due later in the day, which is expected to show a resurgence of price pressures.

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