Asian Stocks Steady, China Slips as PBoC Pauses Monetary Easing

By Ambar Warrick

Investing.com-- Asian stocks steadied from recent losses on Thursday, while Chinese indexes fell after the People’s Bank paused its monetary easing measures amid increased pressure from a hawkish U.S. Federal Reserve.

China’s Shanghai Shenzhen CSI 300 index fell 0.7%, while the Shanghai Composite index fell 1%. The People’s Bank of China (PBoC) maintained its medium-term policy rate on Thursday after steadily lowering lending rates earlier this year. The move was likely driven by increased depreciation in the yuan, which plummeted to two-year lows in recent weeks.

Today’s move indicates that the PBoC is looking to find a balance between shoring up economic growth and allowing further depreciation in the yuan, which is also facing headwinds from rising U.S. interest rates.

China’s government rolled out a slew of stimulus measures this year to support the economy, which was severely damaged by COVID-related lockdowns. These measures also benefited local stock markets, albeit briefly.

Chinese property stocks rallied on Thursday amid reports that the government will roll out more relief for the beleaguered sector. This also benefited Hong Kong’s Hang Seng index, which rose 0.2%.

Broader Asian stocks traded steady after tumbling on Wednesday. The Taiwan weighted index rose 0.2%, while Australia’s S&P/ASX 200 rose 0.3%.

Sentiment remained subdued after data this week showed U.S. inflation remained stubbornly high in August. The readings are likely to invite more sharp interest rate hikes by the Fed, pressuring Asian markets.

A bigger-than-expected U.S. consumer price index reading caused Asian stocks to plummet on Wednesday, with the technology-heavy Hang Seng and KOSPI ranking among the worst-hit. Markets are now awaiting U.S. jobless claims data due later in the day, which could indicate strength in the labor market and give the Fed even more space to raise rates.

Markets are pricing in an up to 100 basis point rate hike by the Fed next week.

Asian stocks have fallen sharply in value this year, as rising U.S. interest rates and fears of an economic recession sapped appetite for risk-driven assets. Economic headwinds in the West have also spilled over into local economies.

Japan’s Nikkei 225 index rose 0.2% on Thursday. Data showed the country logged a record trade deficit in August, as rising commodity prices greatly underpinned energy imports.