ASIA MARKETS: Chinese Stocks Rise, Push Past 1st China Credit Downgrade In Nearly 30 Years
Kospi at record; Nikkei gains
Chinese stocks closed higher Wednesday, shaking off losses as initial concerns wore off from Moody's Investors Service's decision to lower the country's credit rating for the first time since 1989.
Equities fell more than 1% in early trading in both Shanghai and Shenzhen, with the downgrade reminding investors of China's continued growth in outstanding borrowings--especially among companies.
Read:Moody's downgrades China rating for the first time in nearly 30 years (http://www.marketwatch.com/story/moodys-downgrades-china-rating-for-the-first-time-in-nearly-30-years-2017-05-24)
But the declines soon eased, and the Shenzhen Composite Index finished up 0.5%. The Shanghai Composite finished up 0.1%.
"I don't think [the downgrade] came as a surprise to people invested in China," said Hao Hong, head of research at BoCom International in Hong Kong.
Chinese authorities have started pushing entities to cut debt levels, particularly targeting loans made by nonbank firms with little regulatory oversight. The push has hurt Chinese asset prices.
Nomura equities strategist Wendy Liu noted global fixed-income, currency and commodity investors are more concerned about targeted interbank financial deleveraging than equity investors. Even so, there were muted movements in other asset classes as well.
In Hong Kong, the Hang Seng logged a 0.1% rise.
The ratings downgrade also came about a month before MSCI Inc. announces whether to include Chinese-listed stocks into its indexes. Finally getting a yes on that could send equities there jumping as money enters the market from the likes of large index-tracking funds.
The ratings cut has raised some concern Chinese firms may face higher overseas borrowing costs, forcing them to raise more financing at home and squeeze market liquidity.
Elsewhere in Asia, shares ended mostly higher.
An overnight rebound in the dollar versus the yen helped send Japan's Nikkei Stock Average up 0.7%. Meanwhile, Korea's Kospi rose 0.2% to end at an all-time of 2,317.34.
Taiwan's Taiex rose 0.4%, but India's Sensex fell 0.7%.
Australian stocks finished with a 0.2% rise. Equities there sold off briefly following the China downgrade, but the impact was largely been confined to the Australian dollar , which fell some 0.5% against major currencies in Asian trading.
China is the largest market for Australian exports, but near-term worries are unwarranted, said Greg McKenna, chief market strategist at AxiTrader. "China has got control of its capital account," he said, noting that the level of the country's economic growth is more important to Australia than its credit rating.
(END) Dow Jones Newswires
May 24, 2017 22:52 ET (02:52 GMT)