Asian Stocks Higher on China's Stimulus Package
Monday, November 10, 2008; 4:30 PM
SHANGHAI, Nov. 10 -- Asian investors cheered China's economic stimulus package Monday, sending stock markets in Tokyo, Hong Kong and Shanghai soaring, as investors analyzed the impact of $586 billion in new spending.
Japan's Nikkei 225 index jumped 5.8 percent while Hong Kong's Hang Seng index was up 3.5 percent. Building material and construction companies led the rally -- China's package is expected to include a heavy dose of investment in new infrastructure. Mitsubishi Heavy Industries jumped 6.3 percent in Japan. Angang Steel gained 28 percent while China Railway climbed almost 22 percent in Hong Kong.
In China, stocks gained the most since Sept. 19, when the government abolished a tax on stock purchases to try to stimulate investment in the market. The Shanghai composite closed up 7.3 percent.
The rally carried into Europe as well, with major indexes up more than 3 percent early Monday morning. U.S. stocks were up between 1 percent and 1.8 percent in the first half-hour of trading. Stocks in both regions, however, fell by closing time: Major European indexes were up 0.9 percent to 1.8 percent, and U.S. stocks were down between 0.8 percent and 1.9 percent.
Some analysts said that the stimulus package will not change their predictions that the Chinese economy will grow less than 8 percent next year. That signals trouble because China's labor market is growing so rapidly that some economists believe the GDP needs to grow above 8 percent to keep pace.
Duncan Wooldridge, chief Asia economist for UBS in Hong Kong, who estimates a 7.5 percent GDP growth next year for China, said that the country's plans are "a good step in the right direction."
"Across Asia, including China, what we are seeing is governments and central banks shifting to pro-growth policies, and so one should be optimistic about that," Wooldridge said.
However, Tim Rocks, Asia equity strategist for Macquarie Securities in Hong Kong, said that it's too soon to judge whether the stimulus plan will work.
"We have seen confidence today, but there are a lot of unresolved issues. . . . The broad question is when it will actually hit the economy. And given the time lags with such infrastructure spending, it may not until the second half of next year," Rocks said.