Asian stocks digest U.S. banking woes, China outperforms

By Ambar Warrick

Investing.com -- Asian stocks crept higher on Monday as markets gauged the potential fallout from a banking crisis in the U.S., while Chinese indexes outperformed as the government promised more support for the economy.

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes rose about 0.8% each, while Hong Kong’s Hang Seng index rallied over 2% after new Premier Li Qiang sought to reassure the private sector with the promise of easier policies, and that the government will ensure that its annual economic projections are met.

Li’s appointment came as Xi Jinping was officially elected as President for a third straight 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 reopening will likely remain on course, potentially heralding a bigger economic bounceback this year. But readings on the economy have so far painted a mixed picture of a recovery.

Still, Chinese property stocks slumped after heavyweight Country Garden Holdings Company Ltd (HK:2007) warned of a bumper loss in 2022, due to a downturn in the sector.

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

Bank-heavy bourses such as Australia’s ASX 200 and Japan’s Nikkei 225 fell 0.5% and 1.6%, respectively. Malaysia’s FTSE Malaysia KLCI also fell 0.9%.

U.S. regulators intervened over the weekend to reassure markets and stem a bigger fallout from the collapse.

But the prospect of more ructions in the U.S. banking sector saw markets pricing in a greater chance that the Federal Reserve will taper its hawkish rhetoric in the coming months. Most Asian stocks advanced slightly on this notion, with technology-heavy bourses such as South Korea’s KOSPI and the Taiwan Weighted index adding 0.3% and 0.2%, respectively.

Fed Fund futures showed a greater chance that the Fed will hike by 25 basis points next week, down from expectations for a raise of 50 bps. Focus is now on an emergency meeting convened by the Fed later in the day, as well as consumer price index (CPI) inflation data due on Tuesday.

India’s Nifty 50 and BSE Sensex 30 indexes rose about 0.2% as gains in heavyweight technology stocks offset steep losses in banks. Focus is also on Indian CPI inflation data due later in the day, which is expected to show a resurgence in price pressures.