Australia markets closed

Asia stocks set to climb on expectation of China liquidity measures – Stocks were set to trend upwards on Monday morning in Asia, driven by expectations that China will boost liquidity in the market to overcome a slowdown in exports.

Hong Kong’s Hang Seng Index gave up early increases to head mildly into the red in early trading. The index was down 0.12% to 26,569 by 10:07 PM ET (02:07 GMT). Hong Kong has been trending higher since Chief Executive Carrie Lam agreed on Sept. 4 to fully withdraw a controversial extradition bill that has led to 14 weeks of often violent protests. On Monday morning, investors seemed to shrug off yet another weekend of protests and outburst of confrontations between protesters and police.

Lam’s move coincided with some positive news on trade negotiations between the U.S. and China, with both sides agreeing to get back to the negotiating table in early October.

Mainland China stocks have also been trending higher on news that trade negotiations are likely to kick off again. China’s Shanghai Composite was up 0.46% early in the morning session Monday to 3,013. The Shenzhen Component was up 0.46% at 9,871.

Chinese stocks rose despite new data showing that exports fell in August by 1% year-on-year, according to customs data. Analysts who responded to a Reuters poll had predicted a 2% increase. The ongoing trade war with the U.S. seems to be having an impact on both Chinese shipments and global trade.

The silver lining for investors is that the data adds to the possibility of Beijing introducing stimulus measures. On Friday, the People’s Bank of China cut the reserve requirement ratio (RRR) for banks by 50 basis points and 100 basis points for some banks. This is the amount banks are expected to hold on reserve. Cutting it frees up liquidity that banks can deeply.

“In our view, more significant steps are needed if policymakers want to stabilize growth next year at around 5.7%, which we think they do,” said Louis Kuijs, head of Asia economics at Oxford Economics, in comments to CNBC. “In this setting, we expect more visible improvements in imports further down the road.”

Meanwhile, South Korea’s KOSPI was up 0.72% to 2,023. The Korea benchmark was up despite the beginning of the first-ever autoworkers strike in the country, with unionized workers at General Motors Co. launching a three-day strike seeking better pay and conditions.

Data out on Sunday from the Korea Economic Research Institute (KERI) suggested the economy could expand by 1.9% this year, 0.3% lower than the 2.2% suggested in June. KERI attributed the slowdown to the ongoing trade dispute between China and the U.S.

Japan’s Nikkei 225 was up 0.44% to 21,293 while Australia’s S&P/ASX 200 was virtually flat, up just 0.07% to 6,652.

On Friday, U.S. markets lost some steam after a nonfarm payrolls report that did not meet expectations with an increase of just 130,000 in August.

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