The rally comes after Fed Chair Jerome Powell said the central bank is not “actively considering” a 0.75 percent increase.
Asian stocks rose on Thursday after the US Federal Reserve raised its key interest rate by half a percentage point, but there was less flurry than some investors feared.
MSCI’s broadest index of Asia Pacific shares outside Japan rose 0.93 per cent, though trading was restricted as Japanese and South Korean markets were closed for public holidays.
Chinese stocks bucked the trend as rising COVID-19 cases and tighter restrictions in Beijing and Shanghai’s financial hub weighed on investor sentiment.
Gary Ng, a senior economist at Natixis in Hong Kong, told Al Jazeera: “The market is less bullish about the Fed, but we can’t forget that interest rates will only go up in Asia with higher inflationary pressures.” “Liquidity will still be tight and investors need to be prepared for further turbulence across various asset classes going forward.”
Asia’s rally followed US gains after Fed Chair Jerome Powell indicated the central bank is considering similar rate hikes in June and July, but is not “actively considering” a 0.75 percent hike. followed.
The Dow Jones Industrial Average rose 2.81 percent overnight, while the S&P 500 rose 2.99 percent and the Nasdaq 3.19 percent.
Although the Fed’s half-cent rate hike was its biggest increase in 22 years, Powell’s remarks undermined expectations for a period of aggressive tightening that would risk pushing the world’s largest economy into recession.
In Asia, Hong Kong’s benchmark Hang Seng index rose 0.77 per cent in early trade, with the tech sector index rising 1.43 per cent.
Australia’s S&P/ASX 200 also outperformed, up 0.61 per cent.
China’s benchmark CSI300 opened 0.16 per cent lower as mainland markets resumed trading after a three-day holiday.
Jeffrey Haley, senior market analyst for Asia Pacific at OANDA, said Asia’s rally was more restrained than the US due to concerns about economic constraints in the region.
“The relief rally we saw overnight in the US is certainly more muted in Asia. Although the markets are higher, we should note that Japan and South Korea are both out today – two markets mostly driven by short-term retail sentiment,” Haley told Al Jazeera. “I believe Asia is seen in the US. Gaya is struggling to fully replicate the rally as China’s COVID-zero restrictions, their impact on China’s development and, by default, will have an impact on the rest of the region.”
Hailey said the markets are also prepared for a hike in interest rates in the region in the near future.
“Yesterday’s unscheduled rate hike by India threw down other Asian central banks as well,” he said, referring to the Reserve Bank of India’s 0.4 per cent hike on Wednesday. “And the growing threat of rate hikes is also limiting today’s bullish response. As there is 4 per cent increase in oil prices overnight.”
Oil extended gains after the world’s largest trading bloc, the European Union, outlined plans to phase out Russian oil imports.
US crude futures rose 0.4 per cent to $108.21 a barrel and Brent rose 0.36 per cent to $110.54. On Wednesday, both the benchmarks climbed above $5 a barrel.