Global Markets Rally on Stimulus Hopes

Chinese stocks reached two-month highs on Wednesday due to economic stimulus optimism, while Sri Lanka's parliament dissolution steadied its dollar bonds. Beijing's stimulus package bolstered the market, yet analysts question its long-term impact amid weak consumer demand. South African and Sri Lankan stocks also saw gains.

Chinese stocks continued to ride the stimulus momentum on Wednesday, as hopes of economic rebound sent major stock indexes to over two-month highs, while Sri Lanka's president dissolving parliament saw its dollar bonds regain lost ground.

Chinese shares climbed over 1%, and Hong Kong's stocks hit a four-month high for a second day, driven by Beijing's comprehensive stimulus package. This package boosted commodity prices and emerging market assets on Tuesday. The offshore yuan briefly traded below the key 7-per-dollar level for the first time since May 2023.

"Against the prospect of more Fed cuts amid China's policy support for its economy and markets, CNY has scope to play catch-up to the recovery in Asian currencies," noted DBS strategists. Although the stimulus measures have raised expectations that Beijing will soon introduce a fiscal package, analysts remain skeptical of its long-term efficacy given weak consumer demand.

The MSCI EM stocks index is on a five-day winning streak, fueled by China's stimulus and optimism from the U.S. Federal Reserve's recent rate cuts. On the political front, Sri Lanka's President Anura Kumara Dissanayake dissolved parliament, paving the way for a snap general election and named a new prime minister.

Sri Lanka's sovereign dollar bonds gained around 2 cents, and its benchmark stock index jumped 2.4%, on track for a seven-day winning streak. South Africa's main stock index also hit a record high, climbing 1.4% after a market holiday. Investors are now anticipating the Czech Republic's expected 25 basis points rate cut and monitoring Ghana's monetary policy meeting.

(With inputs from agencies.)