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Asian markets move up on US stimulus hopes

(ATF) Most Asian markets rose on Monday, creeping up toward record highs, and rebounding from a sell-off at the end of last week, as investors’ optimism about higher fiscal stimulus from President Joe Biden and a more supportive Federal Reserve eclipsed concern over surging virus infections and new deadly strains.

Stock indices across the region saw modest advances as the MSCI AC Asia (ex-Japan) closed 12 points higher at 933. But markets in India, Taipei, Singapore and Jakarta fell.

US lawmakers are sparring over President Joe Biden’s proposed $1.9 trillion Covid-19 relief plan, which some say is too expensive. But investors continue to expect additional spending to materialize eventually, with a few suggesting a bill could passed within the next two weeks.

Traders are also hoping Fed Chair Jerome Powell will provide reassurance after Wednesday’s policy meeting that $120 billion of monthly bond purchases won’t be tapered any time soon.

Sentiment in Asia was boosted as well by a report that China had surpassed the US to be the largest recipient of foreign direct investment in 2020 with $163 billion in inflows.

The early lifting of lockdown in Hong Kong also helped.

The dollar though, remained soft, hovering about 0.015% lower at around $6.48 per Chinese yuan, while bitcoin continued to slip; at the time of writing it had lost around $391 and was valued at $33,049.

Record highs in HK and Seoul

Stocks outperformed in South Korea and Hong Kong with South Korean shares closed at a record high, and Hong Kong stocks rallied more than 2% on Monday.

The KOSPI soared 68.36 points, or 2.18%, to 3,208.99, rebounding from a 0.6% decline on Friday and marking its fourth gain in five sessions. Investors’ hope that a massive stimulus package will be passed soon in the US and this pushed up the won and the benchmark bond yield as well.

Chip giants Samsung Electronics and SK Hynix surged 3% and 5.1%, respectively. Other heavyweights such as LG Chem and Naver added about 1.5%.

Meanwhile, the Hang Seng Index in Hong Kong jumped 2.41%, or 711 points, to 30,159 as investors welcomed news that leaders had lifted a lockdown in a part of the city.

The index was also boosted by a surge in Tencent Holdings. The tech giant has become a prime target for traders from mainland China, who are flooding record amounts of cash into Hong Kong-listed shares this year.

Tokyo stocks also ended higher as investors shifted focus to Japan’s corporate earnings season with the benchmark Nikkei 225 index climbed 0.67%, or 190 points, to 28,822, and the broader Topix index advanced 0.29%, or 5.36 points, to 1,862.

Toshiba soared 16.8% to 3,460 yen after confirming its return to the prestigious first section of the Tokyo Stock Exchange, while Takeda Pharmaceutical rallied 3.5% to 3,714 yen after four days of declines on profit-taking.

Steel manufacturer Tokyo Tekko was down 2.46% at 2,024 after it cut its full-year profit forecast by 34% to 3.7 billion yen.

Liquor stocks in focus

In China, the blue-chip CSI300 index rose 1% to 5,625, while the Shanghai Composite Index added 0.5% to 3,624.

Liquor makers shined, with Anhui Gujing Distillery and Jiangsu Yanghe Brewery Joint-Stock both rising by their 10% daily trade limits.

“Liquor firms are favoured due to their stable earnings, though investors are also shifting to sectors with low valuations including banking and insurance firms, whose earnings are expected to recover on the back of China’s economic recovery,” Zheng Zichun, an analyst with AVIC Securities, said.

Some of Shanghai’s top financiers said the development of China’s exchanges has been hampered in part by management shortcomings and proposed a raft of changes, including improvement in corporate governance, The Paper reported.

Virus concerns

Still, investors are also wary about surging virus infections and a new, more deadly strain although the rollout of inoculations continues to provide support to equities as investors look towards a return to normal life.

“Vaccine breakthroughs make it likely that life will become more functional again at some point in 2021, resulting in higher GDP growth and more robust corporate earnings,” Axi strategist Stephen Innes said.

“But increasing global Covid-19 infections, new variants of the virus, tightening social distancing restrictions and delays in vaccine rollouts in some places, all increase the near-term growth risks.”

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Key numbers

Euro/dollar: UP at $1.2179 from $1.2168 at 2130 GMT on Friday

Dollar/yen: DOWN at 103.71 yen from 103.79 yen

Pound/dollar: UP at $1.3710 from $1.3683

Euro/pound: DOWN at 88.82 pence from 88.92 pence

(With reporting by AFP)

Indrajit Basu

Indrajit Basu is an India-based correspondent for Asia Financial and wears two hats: journalist and researcher (equity). Before joining AF he reported on business, finance, technology, wealth management, and current affairs for China Daily, SCMP, UPI, India Today Group, Indian Express Group, and many more. He is also an award-winning researcher. If he didn't have to pay bills, he would be a wanderer.

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