Asia-Pacific stocks mostly up; Chinese yuan moves following central bank action

SINGAPORE — Stocks in Asia-Pacific mostly advanced on Monday, with investors monitoring the Chinese yuan’s movements.

Mainland Chinese stocks were among the biggest gainers regionally, with the Shanghai composite up 2.64% to close at about 3,358.46 while the Shenzhen component jumped 3.151% to finish its trading day at approximately 13,708.07.

The moves in Chinese stocks came after state media outlet Xinhua reported Sunday that the country “unveiled a new comprehensive reform plan for Shenzhen,” giving local authorities there a “more direct and greater say in business” in areas such as carrying out market-based economic reforms.

Hong Kong’s Hang Seng index also surged 2.2% to close at 24,649.68. Shares of Chinese banks listed in the city soared: China Construction Bank added 5.58%, ICBC was up 5.74% while Bank of China gained 4.18%.

Elsewhere, South Korea’s Kospi rose 0.49% to close at 2,403.73.

Meanwhile, shares in Australia were higher on the day, with the S&P/ASX 200 up 0.49% to 6,132. In Japan, the Nikkei 225 bucked the trend and slipped 0.26% to close at 23,558.69 while the Topix index shed 0.24% to end its trading day at 1,643.35.

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 1.05%.

Chinese yuan watch

Investors monitored the yuan’s movements on Monday, after the People’s Bank of China announced a rule change that made it cheaper to short the yuan.

Traders short the yuan when they expect the currency to weaken in future. One way to do so is to borrow in yuan in hopes of buying it back at a lower price later and pocketing the difference.

The central bank announced Saturday that financial institutions now no longer need to set aside cash when conducting some foreign exchange forwards trading, with effect from Monday. Previously, financial institutions had to set aside 20% of the previous month’s yuan forwards settlement amount as foreign exchange risk reserves, according to Reuters.

The onshore yuan weakened to 6.7198 per dollar, as compared to levels below 6.7 against the greenback seen last week. Meanwhile, its offshore counterpart last traded at 6.7159 per dollar.

The Chinese central bank’s move is “not to be mistaken for a policy response that is aimed at snuffing out (Chinese yuan) strength,” Vishnu Varathan, head of economics and strategy at Mizuho Bank, wrote in a note.

“The reality is much closer to the PBoC making a judgment call to remove the distortion of this reserve requirement as part of its wider initiative to open up its capital markets,” he said.

Oil prices slip

Oil prices were lower in the afternoon of Asian trading hours, with international benchmark Brent crude futures down 1.52% to $42.20 per barrel. U.S. crude futures also shed 1.6% to $39.95 per barrel.

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 93.074 following a recent slide from levels above 93.3.

The Japanese yen traded at 105.56 per dollar after strengthening from levels above 105.9 against the greenback last week. The Australian dollar changed hands at $0.723 after rising from about $0.71 last week.

Source Article