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Asia’s Markets Ride The Recovery Wave With Nikkei Flying High

Tokyo’s Nikkei 225 broke through 30,000 for the first time in five months as bounceback optimism spread across trading floors despite the continued threat of spreading Covid cases

Eyes were on mainland Chinese markets as investors returned to work from a four-day weekend.

 

Asia’s major markets pushed ahead on Tuesday, building on recent gains off the back of optimism about the global outlook, though rising Delta coronavirus cases and worries about a slowdown in the economic recovery continued to cast a shadow.

Tokyo’s Nikkei 225 briefly broke 30,000 for the first time in five months on growing expectations of a fresh injection of stimulus after Japan’s prime minister announced last week he would step aside.

Traders were also cheered by a better-than-forecast reading on Chinese exports and imports.

 

Also on AF: China Stocks Almost Uninvestable, Economy Spluttering: Enodo

 

The blockbuster growth that characterised the start of the year has tailed off in recent months as the Delta variant sends new infections spiking around the world, tempering consumer spending and forcing some countries to impose new containment measures.

However, many markets have continued to set to new records or multi-year highs because of the ultra-loose monetary policies of central banks around the world – particularly the US Federal Reserve – that have kept borrowing costs down.

While there is a general expectation that that largesse will come to an end soon as economies emerge from the pandemic crisis, Fed officials have indicated they are in no rush to reduce the stimulus just yet as they track the impact of Delta.

And Friday’s massive miss on US jobs creation provided a big boost to markets as it meant the Fed’s planned policy tightening will not likely start until November or December, instead of the September that had been suggested.

 

US HOLIDAY

With US traders off on Monday for a public holiday, Asia had few catalysts but Shanghai, Sydney, Singapore, Wellington, Manila, Mumbai and Bangkok all posted gains. Seoul, Taipei and Jakarta were the only stragglers.

Hong Kong tourism-linked firms were given an extra lift by news that the city’s government planned to partially open the border with China next week, allowing 2,000 non-residents a day to enter.

The Hang Seng Index rose 0.73%, or 190.00 points, to 26,353.63. The Shanghai Composite Index jumped 1.51%, or 54.73 points, to 3,676.59, while the Shenzhen Composite Index on China’s second exchange piled on 1.11%, or 27.28 points, to 2,490.64.

And Tokyo continued its march off the back of stimulus hopes, while a reshuffle of the Nikkei 225 also provided healthy support.

 

CHINA EXPORTS

The gauge is up more than 4% since Thursday’s close, before Prime Minister Yoshihide Suga said he would step down and sparked speculation about who would take his mantle.

The benchmark Nikkei 225 index ended higher for a seventh straight session, advancing 0.86%, or 256.25 points, to 29,916.14, while the broader Topix index climbed 1.09%, or 22.16 points, to 2,063.38.

Data showing a forecast-busting rise in Chinese imports and exports last month eased concerns about slowing growth in the world’s number two economy but OANDA’s Jeffrey Halley added that the readings will likely allow authorities to hold off introducing any fresh support measures.

 

PANDEMIC THREAT

“China’s data will take the heat off the recessionary fears but may also lessen the likelihood, in investors’ minds, of the need for China to open the stimulus taps,” he said.

Still, while the mood is generally upbeat, analysts remain cautious owing to the constant threat of the pandemic.

“The Delta variant remains a cause for concern as the disease is spreading rapidly through unvaccinated communities and the efficacy of the 2021 vintage of vaccines is being questioned,” Chris Iggo, at AXA Investment Managers, noted.

 

MARKETS

Tokyo – Nikkei 225: UP 0.9% at 29,916.14 (close)

Hong Kong – Hang Seng Index: UP 0.7% at 26,353.63 (close)

Shanghai – Composite: UP 1.5% at 3,676.59 (close)

New York – Dow: Closed for public holiday

 

  • AFP and Sean O’Meara

 

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Sean OMeara

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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