HONG KONG: Asian markets were broadly higher on optimism around the earnings season which kicked off on a positive note but Chinese markets underperformed as the central bank’s liquidity operations signalled a desire to rein in leverage.
“This latest commentary from the PBoC official assured the market that liquidity accommodation will be provided, but we wouldn’t get too excited,” said Janice Xue, BofA Securities strategist.
“We continue to expect the PBoC to take a measured and high-precision approach on liquidity injection, leaving the funding condition ‘tightly balanced’ once bonds supply picks up meaningfully.”
Read more: Cash-rich Xiaomi determined to boost its share price
Japan’s Nikkei 225 index ended flat, Australia’s S&P ASX 200 edged up 0.51%, but Hong Kong’s Hang Seng index eased 0.37% and China’s CSI300 slipped 0.64%. Regionally, the MSCI Asia Pacific index advanced 0.61% as expectations of a strong economic recovery fuelled investor sentiment.
“The biggest economy in the region is expected to see more policy normalisation: China has now recovered enough that policymakers can afford to be more conservative and worry more about containing debt and property market risks. That will be a headwind to China equities, despite the solid economy,” said Patrik Schowitz, Global Multi-Asset Strategist, JP Morgan Asset Management.
The early corporate results have also justified the optimistic assessment of the economic recovery as bulge-bracket banks like Goldman Sachs and Wells Fargo got US earnings season off to a good start.
HEADWINDS FEARS
But analysts are also worried about the fallout of the economic recovery and the headwinds Asia could face from inflation and a strengthening dollar.
“Biggest risk remains a market panic about accelerating inflation leading to spiking bond yields and a risk-off,” said Schowitz.
“Wednesday’s US inflation data was interesting: it was slightly higher than expected, but still bond yields fell. That suggests the market was worried about an even higher inflation reading.”
The 10-year US bond yields eased to 1.6165%, down from a 14-month peak of 1.776% struck last month and this has weighed on the dollar’s attractiveness. The dollar eased marginally to 91.7 against a basket of currencies.
Asia Stocks
- Japan’s Nikkei 225 index ended flat
- Australia’s S&P ASX 200 edged up 0.51%
- Hong Kong’s Hang Seng index eased 0.37%
- China’s CSI300 slipped 0.64%
- The MSCI Asia Pacific index advanced 0.61%.
Stock of the day
Chinese online video company Kuaishou Technology plunged as much as 9.7% after it published commitments to abide by anti-monopoly guidelines. Although over 20 tech giants made such commitments, Kuaishou’s pledges appeared most onerous. It made six promises, including not forcing merchants to pick its platform as their sole online venue for sales and promotions, a practice known as “picking one from two”.
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