Mainland China stocks rise on return from holidays as Asia stocks climb

SINGAPORE – Shares in Asia-Pacific were higher in Thursday trade following the US Federal Reserve’s widely expected decision overnight to hike rates by half aa percentage point – its biggest increase in two decades.

Mainland Chinese stocks were in positive territory as they returned to trade following days of holidays. The Shanghai composite gained 1.11% while the Shenzhen component recovered from earlier losses to rise 1.06%.

China’s services sector activity shrunk further in April, a private sector survey showed Thursday. The Caixin services Purchasing Managers’ Index (PMI) declined to 36.2 for April, lower than March’s reading of 42.

I think it was high time [the Reserve Bank of India] took action and tightened monetary policy to control inflation.

Suresh Tantia

senior investment strategist, Credit Suisse

RBI rate hike

Elsewhere in India, the Nifty 50 rose 0.98% while the BSE Sensex gained about 1%. Those moves came after the Reserve Bank of India hiked its main lending rate at an off-cycle monetary policy meeting.

The Indian central bank on Wednesday raised the repo rate – the rate at which the RBI lends to commercial lenders – from 4% to 4.4%.

“Inflation in India is running high, the last print was 6.95% and in the subsequent month, we’re going to see inflation to 7.5%,” said Suresh Tantia, senior investment strategist at Credit Suisse’s Asia-Pacific CIO Office.

“I think it was high time RBI took action and tightened monetary policy to control inflation,” he told CNBC’s “Squawk Box Asia” on Thursday.

The S & P / ASX 200 in Australia climbed 0.63%, while MSCI’s broadest index of Asia-Pacific shares outside Japan gained about 1%.

Markets in Japan and South Korea are closed on Thursday.

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The US Federal Reserve on Wednesday increased its benchmark interest rate by half a percentage point, in line with market expectations. The central bank also outlined a program whereby it will eventually cut its bond holdings by $ 95 billion a month.

Fed Chair Jerome Powell emphasized the commitment to bringing inflation down, though he said a 75 basis points hike is “not something the committee is actively considering.”

Markets on Wall Street jumped overnight following the Fed decision, with the S&P 500 rising nearly 3% to 4,300.17. The Dow Jones Industrial Average surged 932.27 points, or 2.81%, to 34,061.06. The Nasdaq Composite soared 3.19% to 12,964.86.

“It was the push back on a 75bp hike from the US Fed Chair Powell that set the market rally in motion,” Lavanya Venkateswaran, an economist at Mizuho Bank, wrote in a note.

“The market reaction, mainly underscoring a repricing from the aggressive rate hikes built in, does not take away from the hawkish Fed intentions,” said Lavanya.

Currencies

The US dollar index, which tracks the greenback against a basket of its peers, was at 102,581 following a recent decline from above 103.

The Japanese yen traded at 129.13 per dollar, stronger as compared to levels above 130 seen against the greenback yesterday. The Australian dollar changed hands at $ 0.724 after a recent surge from below $ 0.721.

Oil prices were higher in the afternoon of Asia trading hours, with international benchmark Brent crude futures up 0.35% to $ 110.53 per barrel. US crude futures climbed 0.2% to $ 108.03 per barrel.

– CNBC’s Jeff Cox contributed to this report.

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