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Asian Shares Boosted by Signs China is Winning Covid Fight

Stocks across the region recovered on Tuesday with tech firms leading the way in Hong Kong but inflation fears linger


Asian stock markets advanced on Thursday
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.8% in early trade. Photo: Reuters

 

Asian stocks gained ground on Tuesday led by a Hong Kong charge off the back of optimism Beijing was about to ease its tech crackdowns and positive news about the Covid situation in China.  

But lingering concerns about rising prices remains an unsettling factor on trading floors as investors wait for more signals from policymakers.

Shanghai achieved the long-awaited milestone of three straight days with no new Covid-19 cases outside its quarantine zones, which could lead to the beginning of the lifting of restrictions.

“The good news is the headline Covid-19 case number has been falling,” Nomura said in a note, but “we are not at a turning point yet.”

 

Also on AF: China’s ‘Self-Interest’ Adds to Global Inflation: Think Tank

 

Meanwhile, Chinese Vice-Premier Liu He was reportedly due to speak at a meeting on Tuesday with tech executives aimed at promoting development of the digital economy.

The meeting is being closely watched for remarks by Liu and others for clues on how far Chinese authorities will go in easing their regulatory crackdown since late 2020 on the previously high-flying tech sector.  

Hong Kong’s Hang Seng Index was 3.27% higher, as tech firms listed in the city jumped more than 4% on hopes of Beijing’s crackdown on the sector being relaxed. 

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 1.5% on Tuesday, but the index is still down 6.4% so far this month.

Tokyo’s benchmark Nikkei 225 index closed up 0.42%, or 112.70 points, to end at 26,659.75, while the broader Topix index added 0.19%, or 3.45 points, to 1,866.71. In Australia the S&P/ASX200 index gained 0.25%.

Mainland China’s CSI300 Index gained 0.95% while the Shanghai Composite Index also rose 0.65%, or 19.95 points, to 3,093.70. The Shenzhen Composite Index, the mainland’s second exchange, bumped up 0.73%, or 14.04 points, to 1,940.05.

Manila, Singapore, Seoul, and Sydney were also in the green all day, while Indian stocks surged with Mumbai’s signature Nifty 50 index up 2.33%, or 369.75 points, at 16,212.05.

 

China, US Growth Fears

Despite the mild recovery in stocks, however, there were nervy signs elsewhere as economic growth fears in the world’s two largest economies have re-emerged following weak retail sales and factory production figures in China and disappointing US manufacturing data.

The New York Fed’s Empire State manufacturing index published on Monday showed an abrupt fall during May and shipments fell at their fastest pace since the beginning of the pandemic.

The yield on benchmark 10-year Treasury notes rose to 2.9203% compared with its Monday US close of 2.879%, while two-year yields, which rise with traders’ expectations of higher Fed fund rates, edged up to 2.6153%.

The US dollar index, which tracks the greenback against a basket of currencies, fell 0.23% to 103.9 as investors cashed out and trimmed bets on US rate hikes driving further gains.

Investors likewise took profits from a recent rally in oil, sending prices lower on Tuesday after Hungary resisted a European Union push for a ban on Russian oil imports, a move that would tighten global supply.

 

Key figures at around 0720 GMT

Hong Kong – Hang Seng Index > UP 3.3% at 20,602.52 (close)

Shanghai – Composite > UP 0.7% at 3,093.70 (close)

London – FTSE 100 > UP 0.4% at 7,491.42

Tokyo – Nikkei 225 > UP 0.4% at 26,659.75 (close)

West Texas Intermediate > DOWN 0.1% at $114.07 per barrel

Brent North Sea crude > UP 0.1% at $114.37 per barrel

New York – Dow > UP 0.1% at 32,223.42 (Monday close)

 

  • Reuters with additional editing by Sean O’Meara

 

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Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.

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