Asian stocks surge as China reopens borders, Fed fears ease

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By Ambar Warrick

AiVIF.com -- Most Asian stock markets rose sharply on Monday amid optimism over a potential economic recovery in China, while softer-than-expected U.S. jobs data also saw investors pricing in the possibility of less severe interest rate hikes by the Federal Reserve.

Chinese and China-focused stocks were the best performers for the day, with Hong Kong’s Hang Seng index rallying 1.7% to a near six-month high, while South Korea’s KOSPI jumped 2.4%.

The Taiwan Weighted index also jumped 2%, shrugging off a potential escalation in geopolitical tensions after China conducted military drills along Taiwan's border.

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes rose 0.7% and 0.5%, respectively, after the country reopened its international borders on Sunday. The move marks Beijing’s biggest commitment to pivoting away from its strict zero-COVID policy, which ground economic growth in the country to a halt over the past three years.

Investors are now pricing in an eventual economic recovery in the country this year from the reopening. But analysts have expressed caution over the near-term outlook, given that China is facing its worst-yet COVID-19 outbreak after the relaxing of most restrictions.

Broader Asian stocks were also supported by growing bets that the Federal Reserve will tone down its hawkish stance this year, after nonfarm payrolls data released on Friday showed that the U.S. job market was cooling.

The reading gives the Fed less economic headroom to keep raising interest rates at a sharp clip, and is also likely to be reflected in a cooler inflation reading for December. Markets are now awaiting U.S. consumer price index inflation data, which is due on Thursday.

Rising interest rates weighed heavily on Asian stock markets in 2022, as higher yields dented the appeal of risk-driven assets. A reversal in this trend, as the Fed slows its pace of rate hikes, is expected to benefit regional bourses this year.

India’s BSE Sensex 30 and Nifty 50 jumped more than 1% each, recovering from a three-day losing spree as technology stocks roared back from a weak start to the year.

Philippine stocks led gains across Southeast Asia with a 1.4% bounce, while Indonesian stocks were the sole decliners in the region, falling 0.1%.

Optimism over China also boosted Australia’s ASX 200 index, which added 0.6% as major mining stocks cheered the prospect of improved Chinese demand.

Focus this week also turns to the start of the fourth quarter earnings season, with chipmaking giant Taiwan Semiconductor (TW:2330) set to report earnings on Thursday.