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Asian markets soar as epidemic rages on in the West

(ATF) With the pandemic resurgent in Western countries, investment funds have poured into countries that have better contained Covid-19, Sina Finance has reported.

The Korea Composite Stock Index Kospi is one of the world’s best-performing stock indexes in 2021. The benchmark index of the Chinese stock market is close to a record level and the Nikkei 225 index has also set a new high in US dollars. 

The exchange rate of Asian currencies against the US dollar is also in its longest upward trend in more than 20 years.

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Tai Hui, chief strategist for Asian markets at JPMorgan Chase, said: “The market is optimistic about the vaccine development and vaccination news that came out at the end of last year. Investors are working hard to find markets where the value still has room to rise or the current valuation is underestimated.”

The Korea Composite Index Kospi recorded its biggest one-day drop since October 2008 in March last year, and closed at its lowest level since 2009. The circuit breaker mechanism was triggered many times and the index fell below 1,500 points.

But since then, under the influence of loose monetary policy, South Korea’s retail investment has seen a record surge, pushing the country’s stock market to rise, hitting record highs in December and becoming one of the world’s best performing stock markets last year. It reached the highest level in history in January this year.

A report released by the Korean Financial Supervisory Service last month showed that, in November, foreign investors bought 6.125 trillion won in the Korean stock market, a record high since September 2013.

KOREAN STOCKS

Many international investment banks said that due to the gradual recovery of the Korean economy and a strong currency, Korean stocks will continue to be favoured by Korean retail investors and foreign investors. 

JPMorgan Chase predicts that by the end of 2021, South Korea’s KOSPI index will rise to 3,200 points. Samsung Securities analysts say that the highest KOSPI index this year is expected to reach 3,300 points.

The Japanese stock market also performed amazingly well. Driven by the strengthening of the yen, the Nikkei 225 index hit a new high in dollar terms. On Thursday it closed at the highest level in 30 years, at 28,698.26 points.

Although the epidemic in Japan is still severe and the Japanese government has also announced that a state of emergency will be extended to areas that account for 60% of the total economy, the Japanese stock market is still rising with a strong momentum.

Some analysts believe that as the “faucet” of Japan’s loose monetary and fiscal policies are fully opened, Japan, which is facing a less severe epidemic situation than other developed countries in Europe and the United States, could emerge from it in a very strong position. 

CORPORATE PROFITS

It is expected that corporate profits will be high in the next few quarters, with strong performance and higher dividend payouts than other markets, bringing a “good harvest year” to the Japanese stock market.

There is another asset in Japan that performs astonishingly well. Even the Bitcoin rollercoaster seems to be eclipsed by Japan’s electricity futures.

Since the beginning of December last year, Japan’s power futures have soared 13 times, while Bitcoin’s rise was only about 97% during the same period. The severe cold weather and tight supply of natural gas have kept Japan’s electricity situation tight, and Japan’s electricity prices have also soared to their highest level in history.

Bursa Malaysia’s technology stock index has risen more than three times in value from its low in March 2020, which is much higher than other major stock indexes in Malaysia. 

The country’s Supreme Head of State announced that the country entered a state of emergency from January 12 in response to the surge in Covid-19 cases. In addition, it was announced the National Assembly will be suspended. This is the first time Malaysia has announced the suspension of its National Assembly since 1969.

THAI STOCKS

It must be mentioned that Thailand’s electronic stocks have soared.

The share price of Delta Electronics Thailand, a Thai electronic component manufacturer, has risen by more than 1,000% in the past year. As of last Friday, the company’s market value was close to US$29 billion, ranking it third in the Bangkok Exchange by market value, second only to Thailand’s state-owned oil giant PTT and Thailand Airport.

This surprised market observers and prompted the Securities and Exchange Commission of Thailand to issue a volatility warning.

Since the outbreak of the epidemic, manufacturers of electronic components closely related to the domestic economy have become a favourite of the capital market. 

Asian currencies have also performed well. The exchange rate against the US dollar rose for eight consecutive months, the longest in more than 20 years. In addition, as funds continue to flow into Asia, the Bloomberg JPMorgan Asia Dollar Index, which tracks the trends of the ten most actively traded currencies in Asia, is still rising strongly.

Michael J, founder of CrossBorder Capital Howell. pointed out that in 2021 global liquidity is expected to further increase by US$15 trillion, and central banks are preparing to push another US$3-4 trillion of quantitative easing.

By the end of this year, global stock of liquidity is expected to reach US$175 trillion, equivalent to twice the global GDP. Moreover, this new liquidity will mainly come from Asia and emerging markets, which will be significantly different from last year.

Also on ATF:

Chris Gill

With over 30 years reporting on China, Gill offers a daily digest of what is happening in the PRC.

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