Asian Markets React to US Fed's Interest Rate Cut

Asian share markets displayed a mixed response on Thursday, September 19, following a significant interest rate cut by the US Federal Reserve. The Fed made a bold move by lowering its benchmark policy rate by 50 basis points, bringing it down to a range of 4.75 percent to 5 percent. This decision is expected to influence global markets, as it aims to stimulate economic growth amid various challenges.

In Singapore, the Straits Times Index saw a positive uptick, rising by 0.47 percent as of 10:39 AM. Meanwhile, Japan's Nikkei share average experienced a notable increase of over 2 percent, primarily driven by export-oriented stocks. This rise occurred despite the Fed's interest rate cut, as the yen weakened against the US dollar. The Nikkei was reported at 37,133.34, up 2.1 percent, while the broader Topix index climbed 1.9 percent to reach 2,614.09. Notably, Fast Retailing, the owner of the Uniqlo brand, contributed significantly to the Nikkei's gains, alongside a 1.4 percent rise in SoftBank Group, a prominent technology start-up investor. All 33 industry sub-indexes on the Tokyo Stock Exchange were trading higher, with the automakers' index leading the charge with a 3.9 percent increase, highlighted by a 4.9 percent jump in Toyota Motor shares.

Conversely, MSCI's broadest index of Asia-Pacific shares outside Japan faced a decline of 0.4 percent in early trading. This downturn was largely attributed to South Korean markets, which returned from holidays to witness substantial falls in the chipmaking sector, following a pessimistic note from Morgan Stanley. As a result, South Korea's Kospi Index dropped by 0.92 percent as of 1:56 AM GMT. Notably, shares of SK Hynix plummeted by 9.6 percent, while Samsung experienced a 2.6 percent decline.

In China, shares also dipped on Thursday, as concerns regarding a fragile economic recovery overshadowed any potential benefits from the Federal Reserve's decision to cut interest rates. Both China's blue-chip CSI300 Index and the Shanghai Composite Index fell by 0.5 percent in early trading, while the Hong Kong benchmark Hang Seng remained relatively flat. Investor sentiment towards Chinese equities remained subdued, despite the US rate cut potentially allowing for fresh easing measures by Beijing to support its struggling economy. Yan Wang, a chief strategist at Alpine Macro, emphasized that while Fed rate cuts are generally favorable for emerging market assets, the domestic macroeconomic policies and growth outlook in China are far more critical than the Fed's actions. He noted, "Unfortunately, the predictability of these factors remains quite poor."

On a more positive note, Hong Kong-listed mainland property stocks outperformed the broader market, rising by 2.3 percent. In response to the US central bank's actions, the Hong Kong Monetary Authority (HKMA) also cut its base rate by 50 basis points to 5.25 percent. This move aligns with Hong Kong's monetary policy, which closely follows that of the United States due to the city's currency being pegged to the US dollar within a tight range of 7.75 to 7.85 per dollar.

The mixed reactions across Asian share markets highlight the complex interplay between global economic policies and local market dynamics. While the US Federal Reserve's interest rate cut aims to bolster economic growth, the varying responses from different countries underscore the unique challenges each market faces. Investors should remain vigilant and informed, as these developments could significantly impact their investment strategies in the near future.