Asia: Chinese equities rally after holiday but other markets decline

Late on Wednesday, the International Monetary Fund warned pressures in emerging markets could risk asset fire sales and hamper growth in rich countries.

Hong Kong’s Hang Seng Index declined 0.71%, while Japan’s Nikkei Stock Average lost 0.99%, bringing a six-day winning streak to an end.

Data released on Thursday showed Japanese core machinery orders declined unexpectedly in August, as the slowdown in the Chinese economy weighed on sentiment.

Chinese equities bucked the trend as they rallied after a week-long holiday, with the Shanghai Composite Index gaining 2.97%, as it caught up with the recent surge in global markets.

However, China’s mainland benchmark remains 39% off its June peak.

“After being off for a week that has seen a big rally elsewhere, there is some disappointment that China has not climbed more,” said analysts at Deutsche Bank.

Elsewhere, South Korea’s Kospi lost 0.16%, while Australia’s S&P/ASX 200 climbed 0.24%, as it clinched a four consecutive day of gains, remaining on track for the biggest weekly climb since mid-July.

On the currencies front, the Chinese yuan hit its strongest level against the dollar since its August devaluation, while the Malaysian ringgit and the Indonesian rupiah reversed the previous session’s gains and were both down 0.5% against the greenback.

Over the last seven days, gains in emerging markets currencies have been driven by hope that the US Federal Reserve would postpone a first interest rate hike in almost a decade until next year.

“Investors will likely pay attention to how close the call not to hike in September was and how concerned the Fed was about the ‘global economic and financial developments’ identified in September’s FOMC statement,” said Barclays’ analyst Hitendra Rohra.

Meanwhile, the Australian dollar fell 0.3% against its US counterpart to end a six-day rally against the greenback.