Asian stocks mark positive start to 2023, China fears limit gains By Investing.com

By Ambar Warrick

Investing.com– Most Asian stock markets rose on Tuesday amid growing expectations that U.S. interest rates will rise at a slower pace this year, although uncertainty over China’s economic reopening and a warning on a potential recession kept gains limited.

China’s and indexes rose 0.2% and 0.7%, respectively, while Hong Kong’s index jumped 1.4%. But the three indexes slumped between 14% and 21% in 2022.

While the Chinese economy is expected to eventually bounce back on an economic reopening this year, analysts forecast near-term pain as the country grapples with a massive spike in COVID-19 cases.

also flagged continued challenges from COVID-19 in his new year’s address, which struck a more cautious tone than markets were expecting. Recent data showed that shrank for a fifth consecutive month in December.

China’s slowdown impacted several Asian economies dependent on the country in 2022, which in part played into a regional stock rout.

But regional stocks may be due for some relief amid growing expectations that the U.S. Federal Reserve will hike rates at a slower pace this year. A series of recent economic readings suggest that has likely peaked, which necessitates a less hawkish rhetoric from the central bank.

Focus this week is on the of the Fed’s December meeting and data for more cues on monetary policy. Rising weighed heavily on Asian stocks in 2022, with most major bourses ending the year in negative territory.

Markets are now pricing in that the Fed will hike rates by an even smaller 25 basis points in February.

Broader Asian stocks rose on Tuesday. India’s and indexes rose 0.1% each after vastly outperforming their Asian peers in 2022.

The index added 0.6%, while most Southeast Asian bourses also logged strong gains.

But sentiment was also dulled by a that at least a third of the world faces a potential recession this year, amid high inflation and rising interest rates.

Such a scenario, especially if China’s economic reopening is delayed further, could present more headwinds to Asian markets later this year.