Asia: Stocks climb on China stimulus hopes

Asian stocks advanced on Tuesday as worse-than-expected Chinese economic growth data raised hopes of further stimulus measures.

Shanghai’s Composite closed up 3.23%, the Hong Kong Hang Seng index increased 2.07% and Japan’s Nikkei 225 gained 0.55%.

China’s gross domestic product rose 6.8% in the fourth quarter compared to the same period a year ago, weakening from the previous quarter’s 6.9%. Analysts had expected GDP to remain unchanged from the third quarter and the government is targeting 7% growth.

“On this occasion, I think the markets may have been relieved that the numbers were not as bad as they could have been, given the challenges facing the economy during this period of transition and slowing global growth,” said Craig Erlam, senior market analyst at Oanda.

“There is also the fact that there is still plenty of scope for fiscal and monetary stimulus to plug any gaps that appear in the coming years during this period of transition, which occurs at a time when the country is also trying to liberalise its markets, something that has faced many challenges already and will likely continue to do so this year.”

Separately, data showed Chinese retail sales rose 11.1% year-on-year in December, missing expectations for an 11.3% increase.

Industrial production climbed 5.9% in December from a year ago, below estimates for a 6% gain.

Following the reports, the offshore yuan declined. The currency traded in Hong Kong fell 0.21%to 6.5986 a dollar at 1653 local time. The onshore currency in Shanghai was steady at 6.5790, according to the China Foreign Exchange Trade System. The People’s Bank of China set its reference rate at 6.5596, keeping it stable following the previous session's fix of 6.5590.

On an uplifting note for markets, oil prices recovered slightly. At 0930 GMT, Brent crude rose 2.4% to $29.27 per barrel and West Texas Intermediate jumped 2.2% to $29.61 per barrel.

Oil prices slid on Monday after Iran sanctions were lifted, sparking concerns that the already oversupplied market will worsen.

“Investor attraction towards oil remains haunted as speculations swell around the possibility of Iran pumping as much as 500,000 barrels per day of crude oil while ongoing fear that demand for the commodity may be waning has prevented any opportunity for a recovery in value,” said FXTM research analyst Lukman Otunuga.

“The damage of OPEC’s decision to leave production unchanged in December is quite visible in the markets and most investors have already started to bet that the cartel may follow the same decision in future meetings in an attempt to prevent Iran from re-attaining its lost market share.”

Oil stocks in China and Japan gained including Japan Petroleum, China Petroleum, PetroChina and China Oilfield.

Meanwhile, Chinese President Xi Jinping left on Tuesday for the Middle East, with visits planned in Saudi Arabia, Egypt and Iran. The government is trying to make deals to lay infrastructure in those countries to boost China’s construction sector.

Shares in China Railway Group and Power Construction Corp. of China Ltd. rallied on the news.

In Japan, economics minister Akira Amari said the recent sell-off in the country’s equities was due to external factors including worries on slowing emerging markets and the oil price slump. However, he said that Japan's economic fundamentals remained solid, according to Reuters.