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Data from Asia’s two biggest economies boosts markets

(ATF) HONG KONG: Risk sentiment improved on the back of China’s factory data, which showed the economic recovery was on track, although the momentum was seen losing steam in coming months.

But investors remain cautious about the bumpy ride ahead for recovery in the world’s second-largest economy.

“China’s growth recovery should gain momentum in the coming quarters; however, the recovery will likely remain uneven. Growth in infrastructure and other public investment will continue to accelerate, while the revival of private sector investment will remain slow,” said Qu Hongbin, HSBC’s Chief China Economist. 

China’s official manufacturing PMI rose to 50.9 in June from 50.6 in May, outpacing the consensus estimate of 50.5.

“China’s return to growth may occur sooner than we had expected, as soon as the second quarter,” said Vanguard Group in a note. “Our China economists expect a greater external demand shock for China’s export industries in the second half of the year.”

Japan’s Nikkei 225 rose 1.33%, after an upgrade from BlackRock, the world’s biggest asset manager and after economic data gave hints the labour market was on the mend. 

“The labour force should continue to rebound over the coming months as many more who lost their jobs during the state of emergency start looking for employment again. That should push the unemployment rate up to around 4% by the end of the year,” said Tom Learmouth, Japan Economist at Capital Economics. 

“And while industrial production plunged again in May, it should also recover over the coming months.”

Japanese stocks also got a thumbs up from BlackRock, which raised its recommendation on the asset class to neutral.

“We believe that Japan is well positioned from a broad policy perspective to recover relatively quickly from the virus downdraft. The combination of domestic policy support, a relatively benign virus experience, and gearing into the global economic recovery can translate into Japan Equities performance,” said Ben Powell, Chief Investment Strategist, APAC, BlackRock Investment Institute.

Elsewhere in the region South Korea’s Kospi rose 0.71%, Australia’s S&P ASX 200 advanced 1.43% and Hong Kong’s Hang Seng index climbed 0.52%. Mainland China’s CSI300 benchmark added 1.32%.

Credit markets remain busy with new issues from Weibo Inc. Korea Housing Finance, and JG Summit expected to price during the day. CDS spreads tightened across the board with the Asia IG index moving in by one basis point to 85/87 and sovereign CDS spreads narrowing by 1-2 bps.

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Asia Stocks

  • Japan’s Nikkei 225 advanced 1.33%
  • Australia’s S&P ASX 200 climbed 1.43% 
  • Hong Kong’s Hang Seng index added 0.52%
  • China’s CSI300 rose 1.32%
  • The MSCI Asia Pacific index edged up 0.80%.

Stock of the day 

Cowell e Holdings rose as much as 46% after the camera modules maker company announced expectations of a stratospheric rise in profits. It said “the Group is expected to record a net profit attributable to owners of the Company for the Period in sum ranging from approximately US$25 million to approximately US$30 million, as compared with a net profit attributable to the owners of the Company of approximately US$0.8 million for the six months ended June 30, 2019.” 

Umesh Desai

Umesh Desai is the Executive Editor at Asia Financial. Prior to this he spent over two decades with Reuters News as Asia Pacific Chief Correspondent in Hong Kong and Bureau Chief in Bombay. Before becoming a journalist Umesh was a credit ratings analyst with Moody's arm in India - ICRA. A chartered accountant by training, Umesh began his career as an equity analyst. His Twitter handle is @umesh_desai

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