By Chao Deng
Shares in Hong Kong led a rally across most of Asia Tuesday, on expectations for more stimulus from Chinese authorities, specifically in the property sector.
The gains follow fresh readings on China’s economy, which showed further signs of slowdown in manufacturing data released Tuesday.
The Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -2.19% rose 1.8% to 22,381.35 and a gauge of the property sector rose 2.6%. Chinese firms trading in Hong Kong gained 1.6%.
Elsewhere, the Shanghai Composite Index /zigman2/quotes/210598127/delayed CN:SHCOMP -0.57% rose 0.3%, Australia’s S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO -2.42% was up 1.9%, and South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 -0.11% gained 1.6%.
Japan’s Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -0.78% gained 1.3% to 20012.40, closing above 20,000 for the first time since Aug. 20.
The onshore Chinese yuan /zigman2/quotes/210561991/realtime/sampled USDCNY +0.0014% held roughly steady following the International Monetary Fund decision to include the currency in its reserve basket.
China Vanke Co. /zigman2/quotes/203851375/delayed HK:2202 -0.59% shares rose 7.1% in Hong Kong and by the 10% daily maximum in Shanghai. Poly Real Estate Group. Ltd. /zigman2/quotes/201864015/delayed CN:600048 +0.67% gained by its 10% daily upward limit in Shanghai.
Analysts said that Chinese officials could pursue a range of measures to boost the property sector, including a reduction in down payments for first time home buyers to 20% from 25% currently, and lowering the capital gains tax on property.
While authorities haven’t signaled any new measures, “more policy loosening is likely imminent,” said David Millhouse, head of China research at Forsyth Barr Asia. He cited a local media report, which said that officials might make mortgage payments tax deductible, for leading the afternoon rally in the Chinese property sector.
Building expectations for stimulus come amid another batch of economic data signaling a still-murky outlook for China.
China said Tuesday its official reading on factory activity for the month of November fell to 49.6, compared with 49.8 in October. It marked the fourth-straight month the reading was below 50, indicating contraction.
Separately, the Caixin China manufacturing purchasing managers index, a private gauge, rose to 48.6 in November from 48.3 in October.
China’s manufacturing sector remains plagued by overcapacity, falling prices and weak demand. The dimming view casts doubt that the world’s second-largest economy can achieve its target growth of around 7% for the year. The central bank has cut interest rates six times since last November.
Earlier Tuesday, the People’s Bank of China fixed the onshore yuan at the weakest level since late August, at 6.3973 to one U.S. dollar.
The move came after a widely expected decision by the IMF overnight to give the yuan reserve-currency status alongside the dollar, euro, pound and yen. The IMF’s move, which marks a milestone in China’s rise as a global economic power, could help accelerate a mild pickup in international demand for the currency when it becomes effective in October next year.
The onshore yuan, which can fluctuate 2% above or below the fixing, last traded at 6.3985, roughly flat with its level late Monday in Asia. HSBC predicts that the onshore yuan will weaken by the end of the year to 6.50 to one U.S. dollar.
In Australia, the central bank kept rates on hold at a record low of 2.0% at its last policy meeting of the year on Tuesday, as expected.
The Reserve Bank of Australia didn’t sway from its core message that it sees signs of improvement in the non-mining economy. Still, with low inflation gives the bank scope to lower interest rates further if warranted.
The Australian dollar /zigman2/quotes/210560947/realtime/sampled AUDUSD +0.2635% was last up 0.6% at $0.7271.
Other private readings of manufacturing activity in the region showed contraction, too. South Korea’s Nikkei PMI stayed unchanged at 49.1 in November from a month earlier. Taiwan’s rose to 49.5 in November from 47.8 in October.
However, Australia’s manufacturing sector expanded for the fifth straight month, with the Australian Industry Group’s Performance of Manufacturing Index improving by 2.3 points to 52.5 in November.