Once again, the markets told the story on Monday as China and Japan considered monetary policy, with the status quo emerging as the winner.
The People’s Bank of China (essentially the Communist Party’s Central Financial Commission) left the one- and five-year loan prime rates unchanged at 3.45% and 4.2%. Meanwhile, in Tokyo, the Bank of Japan initiated its two-day monetary policy meeting and will announce its decision later today.
This led to the Tokyo stock market rising once more, while markets in Hong Kong and China experienced declines. The Nikkei in Tokyo reached a nearly 34-year high, closing 1.62% higher at 36,546.95, with the broader Topix adding 0.39% to close at 2,544.92. The Nikkei has risen by almost 9% this month.
In contrast, Hong Kong’s Hang Seng fell by 2.73%, driven by real estate stocks, while China’s CSI 300 index slid by 1.72%, and the Shanghai market lost 2.68%.
"Sugar money" is fueling Tokyo’s surge, along with a significantly lower Yen against the greenback. Traders remain optimistic that the Bank of Japan will maintain super-low rates at the conclusion of the meeting today.
Monday's downturn in the Chinese market pushed indices to new five-year lows, a stark contrast to the all-time highs witnessed on Wall Street. Reuters noted that the MSCI market measure for Asian markets, excluding Japan, fell by nearly 0.5% yesterday due to the decline in Chinese markets following the decision not to cut rates.
