Asia: Stocks rally after China and Japan take policy action

China’s stocks stabilised on Wednesday while Japan posted its biggest one-day gain since the height of the global financial crisis in 2008 following policy action from each of the nation’s governments.

Shanghai’s index rose 2.29% at the close of markets while the Hang Seng increased 4.10%. Japan’s Nikkei 225 jumped 7.71%, a day after crashing 2.4% to erase all gains made this year.

China’s Ministry of Finance said it will roll out a “more forceful” fiscal policy to address the slowdown in the world’s second largest economy.

The ministry said it would inject more funds to support some infrastructure projects and implement tax cuts for small businesses.

It will also issue debt quotas for local governments after China’s top legislator this year capped outstanding local-government debt at 16trn yuan.

“This seemed to confirm the hopes of some kind of further Chinese stimulus, hopes that were ostensibly behind the large gains made by the Western markets on Tuesday,” said Spreadex financial analyst Connor Campbell.

“Understandably given the recent, and price-eroding, lack of clarity coming from Asia, signs of firm, growth-supporting policies from China and Japan meant that, with traders back at school after a hectic summer, the European markets opened hell-bent on continuing to recover the losses of the past few weeks.”

Japan’s prime minister Shinzo Abe said the government aims to lower the corporate tax rate by a cumulative 3.3 percentage points over two years through the next fiscal year starting in April 2016.

Also providing a boost in Japan, data from the Cabinet Office showed consumer confidence rose more than expected in August. The sentiment index climbed to 41.7 last month from 40.3 in July, beating forecasts for a reading of 40.5.

In company news, Toshiba reversed declines as CLSA cut its rating to 'sell' from 'buy' and reduced its earnings per share estimate and profit outlook.

Export-oriented stocks including Nissan, Toyota, Honda and Suzuki jumped as the Japanese yen weakened against the dollar.