Asia markets track Wall St rally, boosted by China hopes

Asian markets rallied yesterday, building on a hearty performance on Wall Street and helped by the reopening in China, though analysts continue to warn of near-term volatility caused by surging inflation, rising interest rates and the Ukraine war.Equities have enjoyed some respite in recent weeks from a painful sell-off caused by central bank monetary tightening — particularly by the Federal Reserve — and a spike in prices that is beginning to hit consumers, raising concerns of an economic slowdown or recession.A retreat in US Treasury yields provided a lift to New York traders, as did a jump in Chinese firms listed there fuelled by growing optimism that Beijing is to ease back on its long-running crackdown against the tech sector.The improved mood around tech has come after a report this week said China was close to ending a probe into ride-hailing app Didi Global and restoring its main apps this week.The Wall Street Journal also said investigations into two other firms — Full Truck Alliance and recruitment platform Kanzhun — were coming to a conclusion.And on Tuesday authorities approved a second batch of 60 games in a further step to lightening their approach in the world’s largest mobile entertainment market.Citi analysts said the “announcement will also send a positive signal of policy support to the overall China Internet sector”. Market heavyweights rallied in Hong Kong with Alibaba up more than 10%, NetEase 5.7% higher and Tencent up more than 6%, helping the Hang Seng Index climb more than 2%.Shanghai, Tokyo, Sydney, Bangkok, Jakarta Taipei and Manila were also in positive territory.But Seoul and Wellington were barely moved while Mumbai dipped. But London, Paris and Frankfurt dipped in the morning after opening higher.The moves in Asia came as Beijing relaxes its strict Covid lockdown measures, allowing the world’s number two economy to edge back into life after months.“The bounce in risk sentiment is due to a more positive China tilt where the outlook is set to brighten up as Covid restrictions ease, and state-owned banks are obliged to increase lending again,” said SPI Asset Management’s Stephen Innes.“It certainly feels like the tide is turning on the Mainland, though the overall tone still leans more cautiously optimistic, with key emphasis on ‘cautiously’.”All eyes are on the release Friday of US inflation data for a better idea about the Fed’s plans as it hikes borrowing costs.Officials are expected to lift rates half a point each in June and July with some commentators warning a strong report on Friday could allow them to unveil a three-quarter-point move in September.Such a move would push the dollar up even further against its peers, with the unit at a 20-year high against the yen. And observers said that the uncertainty would continue to cause volatility on markets as banks lift borrowing costs. India on Wednesday announced a fresh hike, a day after Australia unveiled an increase that was twice as big as forecast.“The reality for the economy and probably the stock markets is that aggressive central bank rate hikes are likely to take a sharp bite out of household consumption as costs of living pressures come from goods and services, depressed real wage gains and markedly higher mortgage servicing,” Innes added.“Hence, the central bank’s endgame is to cool inflation by slowing the economy and tightening financial conditions at stock market investors’ expense until price pressures abate.”In Tokyo, the Nikkei 225 closed 1.0% to 28,234.29 points; Hong Kong Hang Seng Index ended up 2.2% to 22,014.59 points and Shanghai Composite closed up 0.7% to 3,263.79 points yesterday.