Asia-Pacific Markets Rally on China’s Benchmark Lending Rate Hold Amid Expectations of Further Stimulus

Asia-Pacific equities posted gains Monday as markets reacted to China’s latest monetary policy decision, with the Hang Seng Index (HSI) rising 1.3% to close at 21,842, while the Shanghai Composite (SSEC) climbed 1.1% to 3,120. The performance followed the People’s Bank of China's announcement to maintain its one-year Loan Prime Rate (LPR) at 3.45%, a move widely anticipated by analysts but closely watched for signals of future stimulus. The decision to hold rates steady comes at a time when China's economy continues to face downward pressure, particularly in property and consumer demand. Despite the pause, markets interpreted the lack of tightening as a sign of policy patience, boosting investor confidence in potential future measures. Financial stocks led the rally, with major lenders such as Industrial and Commercial Bank of China and China Construction Bank seeing gains of 2.4% and 2.1%, respectively. Currency markets also reflected optimism, with the Chinese yuan (CNY) strengthening 0.3% against the U.S. dollar to trade at 7.21, while the AUDUSD pair rose 0.5% to 0.6520, indicating improved risk appetite in the region. The ASX200 advanced 0.9% to 8,167, driven by gains in materials and technology, particularly mining and semiconductor firms benefiting from stronger commodity outlooks. The broader implications point to continued focus on China’s economic trajectory as a key driver for regional and global markets. With inflation subdued and credit growth sluggish, any indication of coordinated fiscal or monetary support could further lift sentiment. Investors now turn their attention to upcoming data on industrial output and retail sales for further insight into policy timing.