Asia: Reform proposals boost Chinese tech, Nikkei bounces on stimulus hope

Asian equity indices enjoyed a stronger session on Thursday, as the prospects for a US interest rate rise receded and Chinese telecoms and tech sectors were boosted by proposed government reforms.

All key indices were in the green, with Japan's Nikkei closing up 1.15%, China's Shanghai composite up 2.32%, the Hang Seng up 2.08% and Singapore's Straits Times index 1.05% ahead.

Asian stocks were shrugging off weakness in US markets as they instead preferred to take comfort from Wednesday's soft US data increasing the likelihood that the US Federal Reserve will stay put on rates for a while yet.

For the first time this week, Japan’s Nikkei was in positive territory despite the yen 0.52% stronger against the dollar and an industrial production data print that disappointed. Tokyo's defensives such as pharmaceuticals were the main gainers, with cyclicals losing out.

Investors took heart from heightened expectations that the Bank of Japan will inject further stimulus to bolster the economy.

Chinese technology and tech stocks were lifted after Beijing said it was reorganizing the telecom industry, leading to further speculation that policy makers will speed up reforms of state-owned businesses to bolster slowing economic growth.

Credit data from the People's Republic showed China’s banks extended a net RMB1050bn in renminbi loans last month, up from RMB810bn in August and more than the consensus forecast. This meant growth in outstanding bank loans remained unchanged at 15.4% year-on-year in September.

Although this will add to concerns about the trajectory of Chinese debt levels, acknowledged Julian Evans-Pritchard at Capital Economics, "in the short-run it will nonetheless be supportive of economic activity".

"We shouldn’t read too much into this number. The stock market rescue package has been funnelling credit to financial institutions. As such, total lending growth isn’t telling us much about broader monetary policy or credit demand."

Elsewhere, the Bank of Korea (BOK) kept rates steady, as expected, but again lowered its growth and inflation forecasts for this year and next.

"The local economy is expected to continue its recovery phase, centred around domestic consumption," governor Lee Ju-Yeol said. "However, uncertainties surrounding the path to recovery remain high," Lee said.

The BOK trimmed its economic growth forecast for this year by one percentage point to 2.7%, from its July estimate.