Asian stocks edged higher from nine-month lows on Friday, as Chinese shares recover in the aftermath of China’s decision to loosen foreign investment curbs, but concerns over the ongoing trade tensions capped underlying sentiment.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 1.5 percent to $539.21, while Australia’s S&P/ASX 200 closed the session with a 0.3 percent loss to A$6,194.60.
Japan’s Nikkei 225 trimmed earlier declines, as it added 0.1 percent to ¥22,293.00, while South Korea’s KOSPI returned to positive territory with a 0.5 percent gain to ₩2,326.13.
Chinese shares, meanwhile, regained some recent losses. Following four consecutive days of declines, the Shanghai Composite index climbed 2.2 percent to CN¥2,848.31, and blue-chip CSI 300 index increased 2.5 percent to CN¥3,510.98.
The Shenzhen Composite advanced 3.2 percent to CN¥1,607.62, while Hong Kong’s Hang Seng index rose 1.5 percent to HK$28,939.00.
Still, both the Shanghai Composite and Shenzhen Composite stayed in bear market territory, despite Friday’s rallies, which means they have pared at least 20 percent from recent highs. Shanghai shares have fallen by about 12 percent for the quarter.
China Eases Rules on Foreign Investment Limits
Analysts stated that the rebounds came after reports of the Chinese government easing rules on foreign investment limits in the country’s banks, automobile industry, heavy industry, and agriculture.
However, some analysts believed that the move, which will take effect on July 28, may not be enough to relieve current tensions between the US and China, with the US requesting for a much better market access and fairer competition for foreign firms.
The list confirms China’s stance that opening up will take place in its own timeframe, they added.
The US and the European Union (EU), China’s major trading allies, have criticized its investment policies that leave Chinese companies mostly free to invest in their markets, while the country restricts the ability of foreign ones to enter the world’s second-largest economy.
The People’s Bank of China (PBOC) also said on Thursday it will uphold a sensible and neutral monetary policy that is neither too tight nor too loose, and that it would ensure to maintain reasonably ample market liquidity.
US-China Trade Row
The US-China trade row is expected to remain a main risk that will keep mainland markets under pressure, as investors in the region worried over the consequences of trade tensions between the world’s two largest economies.
The US ambassador to China on Friday said Washington was unsure of China’s willingness to make enough progress on trade.
The US is set to put the US tariffs on Chinese goods worth $34 billion into motion on July 6 to penalize China for what the US described as intellectual property abuses.
The tariffs, if imposed, might result to retaliatory actions from Beijing that could act as a catalyst for a trade war between two countries.
Adding to investors’ worry was the Federal Reserve’s hawkish view of the monetary policy. Chief Economist David Mann stated that they were being vigilant that the combination of worsening trade outcomes, higher oil prices, and a hawkish Fed may dampen confidence further this year and beyond.
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