Asian Stock Market Overview
Most Asian stocks rose on Wednesday after a report suggested that China will increase fiscal spending in the upcoming year, despite cautious sentiment ahead of a Federal Reserve rate decision limiting gains.
Regional markets received mixed signals from a weak overnight session on Wall Street, in which the NASDAQ Composite fell from record highs, and the Dow Jones Industrial Average recorded its worst losing streak in over 40 years.
U.S. stock index futures remained flat in Asian trading as attention centered on the Fed. The central bank is widely anticipated to cut rates by 25 basis points later in the day, though it's also expected to indicate a slower pace of easing in 2025, a trend that could exert pressure on risk-driven markets. Additionally, central bank meetings in Japan, Thailand, Indonesia, and the Philippines are scheduled for this week.
Chinese Stocks Performance
Chinese Stocks Upbeat with Increased Fiscal Spending Proposal
Chinese indexes, specifically the Shanghai Shenzhen CSI 300 and Shanghai Composite, rose by 0.6% and 0.7%, respectively, while Hong Kong's Hang Seng index gained 0.9%. A report from Reuters indicated that Beijing will increase its budget deficit from 3% to 4% of GDP in 2025, marking its highest level ever, while targeting 5% GDP growth for a third consecutive year.
The revised deficit plan involves higher fiscal spending, consistent with the more expansionary fiscal policies discussed during last week's Politburo meeting and the Central Economic Work Conference. The additional 1% GDP point represents an estimated 1.3 trillion yuan ($179.4 billion) in further spending, as China also plans to fund more stimulus through debt issuances. This increased fiscal target has fueled optimism that Asia’s largest economy will experience growth amid persistent deflation and increased trade tensions with the U.S. under the incoming Trump administration.
Japanese Stocks Response
Japanese Stocks Muted; Honda-Nissan Merger Sparks Mixed Reactions
Japan’s Nikkei 225 index dipped 0.3%, while the TOPIX index climbed 0.3%. Investors were cautious ahead of a Bank of Japan meeting this week, where analysts are divided on expectations for a hike or a hold.
Nissan Motor Co., Ltd. and Mitsubishi Motors Corp. were the leading performers on the Nikkei, surging 22% and 13% respectively, following reports that Honda Motor Co. and Nissan are considering a merger, potentially including Mitsubishi. Conversely, Honda's shares fell by around 2%.
This merger comes as both Honda and Nissan face heightened competition from electric vehicles and Chinese manufacturers. If successful, it could create one of the largest automakers globally and strengthen competition against Japanese giant Toyota Motor Corp, whose shares rose over 2% on Wednesday.
Broader Asian markets exhibited mixed results. South Korea’s KOSPI gained 1%, buoyed by reassurances of market stability from acting President Han Duck-soo following President Yoon Suk Yeol's impeachment. Australia’s ASX 200 inched up by 0.2% on positive sentiment regarding China, while Singapore’s Straits Times Index declined by 0.3%. Futures for India’s Nifty 50 index indicated a soft opening following a more than 1% drop on Tuesday.
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