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Asian stocks mostly extend rally after China rate cut

A pedestrian walks in front of a share prices board showing the numbers on the Nikkei 225 at the Tokyo Stock Exchange in Tokyo, Japan.
Kazuhiro Nogi | AFP | Getty Images
A pedestrian walks in front of a share prices board showing the numbers on the Nikkei 225 at the Tokyo Stock Exchange in Tokyo, Japan.

Asian stocks mostly rose on Monday after a rate cut in China fueled risk appetite.

The People's Bank of China (PBOC) lowered its benchmark interest rates by 25 basis points, alongside a half-percentage cut in the reserve requirement ratio (RRR), to jumpstart a slowing economy.

Friday's moves marked the sixth time since November that the PBOC has cut interest rates and the fourth across-the-board reduction of the amount of deposits banks are required to hold in reserve.

"The estimated cash released from these policy changes is 600 to 700 billion yuan in liquidity (about $93.75 to $109.3 billion). Considering the inflation and industrial production [data] over the past quarter, this should be no surprise. In fact, the surprise is that it's taken this long for the PBoC to pull the trigger," IG's market strategist Evan Lucas wrote in a note released early Monday.

"What might be missed by the headline reads is that the PBOC has abolished the deposit rate ceiling – this is a big step forward in liberalizing the interest rate market and shows China is very much committed to its goals of liberating the financial system," he added, referring to the 25-basis-point cut in its one-year benchmark deposit rate.

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Following the move, Wall Street finished sharply higher on Friday, with the Nasdaq Composite settling at a two-month high as earnings from companies such as Microsoft beat market expectations. Stocks had already been given a boost by hints of further stimulus from the European Central Bank (ECB) last week.

The tech-heavy index surged 2.3 percent, while the Dow Jones Industrial Average and S&P 500 rose for the second straight day, up 0.9 and 1.1 percent respectively.

Meanwhile, Beijing kicks off its fifth plenary session – a key four-day meeting — on Monday, where the nation's economic and social policies for the next five years will be finalized.

Symbol
Name
Price
 
Change
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NIKKEI
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HSI
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ASX 200
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SHANGHAI
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KOSPI
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CNBC 100
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China stocks choppy

Share markets in China ended Monday on a positive note, with the key Shanghai Composite index closing up 0.5 percent.

Among other indexes, the CSI300 Index of the largest listed companies in Shanghai and Shenzhen gained 0.5 percent and the smaller Shenzhen Composite reversed direction to settle 0.7 percent higher.

In Hong Kong, the benchmark Hang Seng index slipped 0.1 percent after hitting a more than two-month high earlier in the session.

The spotlight was on China Reinsurance (Group), which opened up 2.6 percent at HK$2.770 in its market debut in Hong Kong, after raising $2 billion in the second largest initial public offering (IPO) in the city for 2015.

Shares of the state-owned reinsurer were last seen flat at the IPO price of HK$2.70.

"There's been a rollercoaster ride since the renminbi depreciation in August. Market sentiment on [both] China's economy and equity markets have been very negative and it is starting to improve in the past 3-4 weeks. The listing of new stocks, especially pretty big IPOs, show market sentiment is indeed improving,", Deutsche's chief China economist, Zhiwei Zhang, told CNBC Asia's "Squawk Box."

Taiex rises 0.8%

Taiwan's weighted index headed north, with the country's Apple suppliers cruising higher on the back of a rally in the shares of the iPhone maker.

Pegatron and Catcher Technology bounced up 2.1 and 1.8 percent respectively, while Hon Hai Precision gained 1.5 percent.

Nikkei jumps 0.7%

Japan's Nikkei 225 index trimmed gains to finish modestly below the 19,000 mark, but still managed to close at two-month highs.

Among winners, Hitachi surged 6.1 percent after raising its April-September net profit forecast by 39 percent from its previous estimate. Panasonic also soared 6.1 percent, with the help of a report by the Nikkei business daily that its first-half operating profit likely rose 10 percent from a year ago.

Nintendo closed up 1.7 percent following the Wall Street Journal's report last Friday that the videogame company may announce its first smartphone game with DeNA this week. DeNA shares also got a lift, up 0.9 percent.

Toshiba doubled gains to 3.6 percent upon news that the company is set to sell its image sensor business to Sony for around 20 billion yen($164.68 million) as part of a restructuring plan, sources told Reuters on Saturday.

ASX flat

Australia's S&P ASX 200 index retreated from an intraday high of 5,384 points to tip-toe just below the flatline.

A pullback in miners and banks underpinned the reversal; market bellwether BHP Billiton surrendered gains to close down 0.1 percent, while Rio Tinto halved gains to 0.8 percent. Fortescue Metals lost 0.8 percent.

Westpac and Commonwealth Bank of Australia held on to gains of 0.9 and 0.2 percent respectively, but National Australia Bank ticked down 0.1 percent.

The top performer for the day was Bluescope Steel, which jumped 10 percent, after saying that it would keep its flagship Port Kembla steelworks open after persuading the government to defer A$60 million ($43 million) in payroll tax.

Meanwhile, broadcaster Ten Network said it would raise 154 million Australian dollars ($111 million) by selling shares to the Australian pay TV unit of News Corp and existing shareholders, after posting a net loss of A$312.2 million for the year to August 31. Trading in Ten Network shares were halted following the announcement.

Kospi adds 0.4%

South Korea's Kospi index edged up, thanks to late-day gains in the bourse's top weighted stocks Samsung Electronics and Hyundai Motor.

After seeing directionless trade for most of Monday's session, both shares managed to close up 0.2 and 0.6 percent respectively. Kia Motors leaped 2.1 percent.

In the currency space, the won plunged as much as 1.1 percent to 1,137.7 per dollar early Monday, but has since recovered to 1,132.6.

Rest of Asia

Singapore shares held near their highest level since August 17, as the region-wide China-led rally helped the bourse to offset disappointing industrial output data. The key Straits Times index held on to gains to close 0.48 percent higher.

The country's industrial production fell 4.8 percent on-year in September, slightly wider than market forecasts of a 4.6 percent decline in a Reuters poll. On a month-on-month basis, factory output grew just 0.5 percent in September, below expectations for a 1.0 percent rise.

Malaysian shares lagged behind their regional peers, as investors digested the government's 2016 budget which included measures to help the less well off and bolster economic growth in a country hit hard by weak global energy prices.

The benchmark FTSE Bursa Malaysia KLCI slipped 0.24 percent at the close.