Hong Kong, Shanghai lead markets rally after China stimulus

HONG KONG, China — Hong Kong and Shanghai stocks led gains across Asia and Europe on Tuesday after China unveiled fresh stimulus measures as the country's leaders struggle to kickstart growth in the world's number two economy.

After a string of weak data that has fanned worries about the financial health of the country, the central bank said it would make it easier for lenders and lower a key interest rate.

The decision came as traders were already upbeat after the Federal Reserve last week lowered borrowing costs for the first time since 2020 and indicated more were in the pipeline through to 2026.

The world's second-largest economy has yet to achieve a post-pandemic recovery owing to a prolonged property sector debt crisis, deflationary pressure and high unemployment.

While Beijing has resisted calls to unveil a so-called bazooka stimulus similar to that seen during the global financial crisis, it has pushed through a series of piecemeal measures that appear to have done little to turn things around.

People's Bank of China chief Pan Gongsheng told a news conference that "the reserve requirement ratio will be cut by 0.5 percentage points in the near future to provide long-term liquidity to the financial market of about one trillion yuan ($141.7 billion)".

It will also "lower the interest rates of existing mortgage loans and unify the down payment ratios for mortgage loans", he added.

Hong Kong and Shanghai stocks rallied around four percent.

There were gains in Tokyo as dealers returned from a long weekend, while Singapore, Seoul, Taipei, Manila, Mumbai, Bangkok and Jakarta also rose, but Sydney and Wellington retreated.

London, Paris and Frankfurt all rallied at the open.

The moves represent "the most significant... stimulus package since the early days of the pandemic", said Julian Evans-Pritchard, head of China economics at Capital Economics.

But he warned "it may not be enough", adding a full economic recovery would "require more substantial fiscal support than the modest pick-up in government spending that's currently in the pipeline".

And Moody's Analytics' Greater China analyst Heron Lim said: "We were expecting these after a weak run of economic data in