Chinese ADRs Jump as Mild US Inflation Raises Rate-Cut Bets

Chinese ADRs rallied in premarket trading on Wednesday, as tame US inflation data fuelled rate-cut expectations and corporate earnings prospects brightened.

YINN rose 6%; Bilibili and NetEase rose 5%; Trip.com and Li Auto rose 4%; Alibaba, NIO, PDD Holdings, and Tencent Music rose 3%; Baidu rose 2%; JD.com and XPeng rose 1%.

The S&P 500 and the Nasdaq 100 both hit record highs overnight after US inflation data came in line with economists’ projections, bolstering hopes that the Federal Reserve would cut interest rates next month amid signs of a cooling jobs market. The probability of a 25-basis-point rate cut next month rose to 94.3 per cent from 85.9 per cent before the data release, according to CME Group.

Lower US dollar interest rates typically benefit risk assets in Asia, with investors rotating out of dollar-denominated investments into alternatives that could yield higher returns. Ample liquidity may add momentum to Chinese ADRs that are already riding on de-escalating US-China trade tensions and faster-than-estimated first-half economic growth in the Asian nation. Morgan Stanley said last week that foreign buying of Chinese stocks would accelerate after summer.