Asia stocks buoyed by China fiscal targets; Fed angst limits gains

Investing.com– Most Asian stocks rose on Wednesday after a report suggested that China will target increased fiscal spending in the coming year, although caution before a Federal Reserve rate decision limited gains.

Regional markets took middling cues from a weak overnight session on Wall Street, as the NASDAQ Composite fell from record highs and as the Dow Jones Industrial Average logged its worst losing streak in over 40 years. 

U.S. stock index futures were flat in Asian trade, with focus squarely on the Fed. While the central bank is widely expected to cut rates by 25 basis points later in the day, it is also expected to signal a slower pace of easing in 2025- a trend that could herald pressure on risk-driven markets. 

Beyond the Fed, central bank meetings in Japan, Thailand, Indonesia and Philippines are also due this week.

Chinese stocks upbeat as report forecasts 4% GDP deficit in 2025 

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes rose 0.6% and 0.7%, respectively, while Hong Kong’s Hang Seng index added 0.9%. 

Reuters reported that Beijing will raise its budget deficit to 4% from 3% of gross domestic product in 2025- its highest on record, and will also target GDP growth of 5% for a third consecutive year. 

The new deficit plan entails higher fiscal spending, and is in line with the more expansionary fiscal policy outlined by officials during the Politburo meeting and the Central Economic Work Conference last week. 

The additional 1% GDP point indicates about 1.3 trillion yuan ($179.4 billion) in additional spending, the Reuters report said. China will also fund more stimulus through debt issuances. 

The increased fiscal target spurred hopes that growth in Asia’s biggest economy will pick up, as it grapples with persistent deflation. China is also expected to ramp up fiscal spending in the face of increased U.S. trade headwinds under incoming President Donald Trump. 

Japanese stocks muted; Honda-Nissan merger elicits mixed reaction

Japan’s Nikkei 225 index fell 0.3%, while the TOPIX index rose 0.3%. Japanese markets were largely skittish in anticipation of a Bank of Japan meeting this week, where analysts are split between expectations for a hike or a hold. 

Nissan Motor Co., Ltd. (TYO:7201) and Mitsubishi Motors Corp. (TYO:7211) were the top performers on the Nikkei, rallying 22% and 13%, respectively, after local media reported that Honda (NYSE:HMC) Motor Co Ltd (TYO:7267) and Nissan were planning to merge, and could also rope in Mitsubishi.

Honda’s shares fell around 2%. 

The merger comes as Honda and Nissan (OTC:NSANY) grapple with heightened competition from electric vehicles and Chinese manufacturers. Any potential merger could create one of the world’s biggest automakers, and will likely offer more competition for Japanese major Toyota Motor (NYSE:TM) Corp (TYO:7203)- whose shares rose over 2% on Wednesday. 

Broader Asian markets were mixed. South Korea’s KOSPI rose 1% amid persistent assurances of market stability from acting President Han Duck-soo, after President Yoon Suk Yeol was impeached over a failed attempt to impose military law. 

Australia’s ASX 200 rose 0.2% on optimism over China, while Singapore’s Straits Times Index fell 0.3%. 

Futures for India’s Nifty 50 index pointed to a soft open, after the index tumbled over 1% on Tuesday.