Volkswacht Bodensee - Hong Kong, Shanghai rally on China pledges but Asia markets mixed

Traders in the Chinese cities enjoyed much-needed buying interest after a unit that controls company stakes on behalf of the government said it had expanded the scope of investments.

Hong Kong and Shanghai are among the world's worst-performing markets in 2024 as traders fret over ongoing weakness in the world's second-largest economy, particularly the colossal property sector, as well as government crackdowns on various industries, including tech.

China's leadership has become increasingly worried about the sell-off, which has wiped trillions off valuations, and has unveiled a string of measures to try to staunch the rout.

Central Huijin Investment, the unit that holds Chinese government stakes in big financial institutions, said it would increase its exchange-traded fund holdings.

That was followed by the China Securities Regulatory Commission saying it would urge more action from long-term funds and call on listed firms to ramp up repurchases, while Bloomberg reported President Xi Jinping would meet officials to discuss the market's dire performance.

The developments came after officials on Sunday pledged to provide support to avoid wild fluctuations.

"Huijin's announcement will guide and encourage more funds to buy and also confirms the market speculation on more state buying recently," said Zhou Nan, at Long Hui Fund Management.

"There's very limited room for further slide but the market may continue to fluctuate before the bottom can be solidified."

However, analysts have warned that while such moves could provide some short-term relief, the government needed to address long-standing problems within the economy -- particularly the property sector -- to restore confidence.

"Right now the market is looking for clearer signals on the economic recovery," said JPMorgan Asset Management's Marcella Chow.

"Expectations remain quite low -- markets and investors are still grappling with the weak economic recovery," she told Bloomberg News.

Hong Kong stocks jumped close to four percent, with tech giants including Alibaba and JD.com among the best performers, while Shanghai piled on more than three percent. Both are still down more than five percent since the start of the year.

There were also gains in Manila, Mumbai, Bangkok and Jakarta but Tokyo, Sydney, Seoul and Singapore fell.

Investors were also still coming to terms with the prospect of US interest rates being kept at two-decade highs following a forecast-busting jobs report last week and a warning from Federal Reserve boss Jerome Powell that an imminent cut was unlikely.

While inflation continues to come down, central bank officials have been reticent about pushing for a reduction in borrowing costs, citing a still-robust jobs market and other indicators showing the economy remains in rude health.

Figures Monday added to that, with a gauge of service-sector activity hitting a four-month high.

That reading "crushed any hopes for a silver rate cut lining in the data to start the week", said SPI Asset Management's Stephen Innes.

"Overall, the... release emphasised the idea that, if anything, the US economy gained momentum last month. At the margins, this suggests a potential resurgence in price pressures.

"Considering the jobs report alongside this data, it dealt another blow to expectations of rate cuts in March."

All three main indexes on Wall Street finished in the red, with the Dow and S&P 500 having hit record highs on multiple occasions in recent weeks thanks to a rush into tech giants, including Amazon and Meta.

- Key figures around 0700 GMT -

Tokyo - Nikkei 225: DOWN 0.5 percent at 36,160.66 (close)

Hong Kong - Hang Seng Index: UP 3.8 percent at 16,094.21

Shanghai - Composite: UP 3.2 percent at 2,789.49 (close)

Dollar/yen: DOWN at 148.42 yen from 148.68 yen on Monday

Euro/dollar: UP at $1.0752 from $1.0745

Pound/dollar: UP at $1.2552 from $1.2536

Euro/pound: DOWN at 85.66 pence from 85.68 pence

West Texas Intermediate: UP 0.1 percent at $72.84 per barrel

Brent North Sea Crude: UP 0.1 percent at $78.05 per barrel

New York - Dow: DOWN 0.7 percent at 38,380.12 (close)

London - FTSE 100: FLAT at 7,612.86 (close)

E.Burkhard--VB