Asian Stocks Drift Higher with Stimulus Hopes Amid Weak Chinese PMI Data

Infotrading.io - Most Asian stocks experienced a slight rise on Friday, with the market's focus shifting towards the impending U.S. Personal Consumption Expenditures (PCE) inflation data. Concurrently, Chinese markets saw an uptick as weak business activity data increased hopes for more economic stimulus from Beijing.

Asian markets took cues from a weak overnight close on Wall Street, where soft gross domestic product data compounded concerns over stalling economic growth and persistently high interest rates. Consequently, U.S. stock index futures fell during Asian trading hours.

The spotlight was on the PCE price index data, the Federal Reserve's preferred inflation gauge, expected to provide more insights into future interest rate movements. Anticipation of this critical data release limited significant gains in the Asian markets.

Chinese Stocks Advance Amid Weak PMIs and Stimulus Hopes

China's Shanghai Shenzhen CSI 300 and Shanghai Composite indexes both rose by about 0.3% on Friday. This positive movement occurred despite purchasing managers index (PMI) data revealing a decline in business activity. Specifically, China's manufacturing PMI fell back into contraction in May, while the non-manufacturing PMI grew at a slower-than-expected rate, indicating that the boost from earlier stimulus measures was waning.

These weak readings have bolstered expectations that Beijing might introduce more policy support to stimulate the economy. After implementing several supportive measures throughout May, there is an increased urgency to expedite the rollout of policies to support consumption and investment, aiming to keep the economy on track to achieve its 5% growth target for the year.

Although Chinese stocks were set for a flat finish to May, following a rebound from multi-year lows that stalled in recent weeks, Hong Kong stocks outperformed for the day. The Hang Seng index surged by 1.3% as investors took advantage of heavily discounted heavyweight technology stocks. Notably, the Hang Seng was the best performer in Asia through May, up nearly 4% for the month as investors sought more exposure to a potential Chinese economic recovery.

Asian Stocks Drift Higher but Set for Middling May Performance

While most Asian stocks rose on Friday, they were set for a middling performance in May. Fears of high interest rates and inflation have battered sentiment towards equity markets.

Japan’s Nikkei 225 index rose by 0.3%, and the broader TOPIX added 0.7%, buoyed by consumer price index data from Tokyo showing a mild increase in inflation. Despite these gains, both indexes were set for a flat-to-low performance in May, remaining below the record highs hit earlier in 2024.

South Korea’s KOSPI rose by 0.4% on Friday but was set to lose nearly 2% in May, affected by a rout in heavyweight chipmaking stocks amid growing doubts over artificial intelligence. Meanwhile, Australia’s ASX 200 rose by 0.5% and was set for a flat end to May, with concerns growing that the Australian economy was cooling due to persistent inflation and high interest rates.

Futures for India’s Nifty 50 index pointed to mild gains after the index fell sharply from record highs earlier in the week. Jitters over the upcoming 2024 general election put the Nifty on course for mild losses in May, with election results due on June 4.

In conclusion, while Asian markets showed some positive movement, the overall performance for May remained mixed. Investors are closely watching key economic indicators and potential stimulus measures, which will likely continue to influence market trends in the coming months.