Asia Markets

Chinese stocks surge as the country cuts its loan prime rate

Key Points
  • Mainland Chinese stocks surged by the market close on Thursday.
  • Data from the Australian Bureau of Statistics showed the seasonally adjusted unemployment rate in January rising to 5.3% from a reading of 5.1% in December 2019.

Mainland Chinese stocks surged by the market close on Thursday, with the country cutting its loan prime rate (LPR) as the country grapples with the economic impact of an ongoing coronavirus outbreak.

The Shanghai composite jumped 1.84% to around 3,030.15 while the Shenzhen composite soared 2.152% to about 1,886.14. The Shenzhen component advanced 2.43% to 11,509.09.

Hong Kong's Hang Seng index, on the other hand, slipped 0.28% as of its final hour of trading.

In a move that was largely in line with expectations, the People's Bank of China announced a reduction in the lending benchmark rate Thursday. The 1-year LPR was reduced by 10 basis points, while the 5-year LPR saw a 5 basis points deduction. The announcement came days after the PBoC reduced the rate for medium-term loans.

Elsewhere, shares in Japan rose. The Nikkei 225 added 0.34% to 23,479.15 while the Topix index also advanced 0.16% to 1,674.48. South Korea's Kospi closed 0.67% lower at 2,195.50.

Stocks in Australia saw gains as the S&P/ASX 200 rose 0.25% to close at 7,162.50. The moves came as an earlier release showed Australia's unemployment rate rising on a seasonally adjusted basis in January. Data from the Australian Bureau of Statistics showed the seasonally adjusted unemployment rate in January rising to 5.3% from a reading of 5.1% in December.

Following that release, the Australian dollar changed hands at $0.6642 after seeing an earlier high of $0.6696.

"While the fall in the unemployment rate to 5.1% in December gave the (Reserve Bank of Australia) the signal that another interest rate cut was not necessary at its February meeting, today's data confuses the interest rate debate because the RBA's latest forecasts assume the unemployment rate will average 5.2% for now," Diana Mousina, senior economist at AMP Capital, wrote in a note.

"In our view, the higher than expected lift in the unemployment rate on its own is unlikely to push the RBA to cut at its March meeting as the central bank would want to see if the increase in the unemployment rate will be repeated in next month's employment figures," Mousina said, though she warned the chance of a rate cut in March is high at around 40-50%.

Shares of airline Qantas surged 5.87% after the company announced on Thursday it was adjusting its capacity to Asia until at least late May. The change comes amid an ongoing coronavirus outbreak, a situation which the airline said is "unfolding and the outlook is uncertain."

Overall, the MSCI Asia ex-Japan index was 0.35% lower.

Overnight on Wall Street, the S&P 500 and Nasdaq Composite touched record highs. The broad index closed 0.5% higher at 3,386.15 while the Nasdaq added about 0.9% to end its trading day at 9,817.18. The Dow Jones Industrial Average also rose 115.84 points to close at 29,348.03.

Currencies and oil

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 99.835 after touching an earlier low of 99.528.

The Japanese yen traded at 111.73 per dollar after seeing a sharp weakening yesterday from levels below 110.4.

Oil prices were higher in the afternoon of Asian trading hours, with international benchmark Brent crude futures up 0.32% to $59.31 per barrel. U.S. crude futures gained 0.75% to $53.69 per barrel.