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Investors cheer as Asian factories confirm demand return

A poll of analysts had expected China's GDP to grow 5.2% in the third quarter. Photo: Reuters.

(ATF) Asian markets roared back on Tuesday after data from the region’s factories showed a pick-up in activity and the broader-based recovery was a likely harbinger of a virtuous cycle, analysts said.

“The November PMI reports reinforce our view that external demand is still on track of recovery, despite the resurgence in Covid cases,” Barclays analysts said in a note while adding that there were encouraging signs that strength in manufacturing orders may be spilling over into improved employment prospects gradually.

“If this trend is sustained, tight operational rates will likely encourage manufacturers to expand staffing levels, while firmer demand may also allow manufacturers to start passing on higher input costs to their customers. All countries reported improved trade PMIs, with China, Korea and Taiwan seemingly benefiting the most, as evidenced by their solid new export orders PMIs,” the note said.

Japan’s Nikkei 225 index vaulted 1.34%, Australia’s S&P ASX 200 added 1.08%, Hong Kong’s Hang Seng index advanced 0.86% and China’s CSI300 outperformed the region with strong Caixin/Markit Manufacturing Purchasing Managers’ Index(PMI) data, surging 2.15%. Regionally, the MSCI Asia Pacific index rose 0.66%.

‘Decade-high’ PMI

China’s Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) in November rose to a decade-high 54.9 from October’s 53.6, with the gauge staying well above the 50-level that separates growth from contraction for the seventh consecutive month.

“We expect the economic recovery in the post-epidemic era to continue for several months. At the same time, deciding how to gradually withdraw the easing policies launched during the epidemic will require careful planning as uncertainties still exist inside and outside China,” said Wang Zhe, Senior Economist at Caixin Insight Group.

US Treasuries sold off with the 10-year yield rising 2 basis points to 0.86% and the dollar weakened against a basket of currencies by 0.1% to 91.81.

US Federal Reserve Chairman Jerome Powell warned in his testimony released ahead of a Tuesday hearing the “outlook for the economy is extraordinarily uncertain”.

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Asia Stocks

· Japan’s Nikkei 225 index vaulted 1.34%

· Australia’s S&P ASX 200 added 1.08%

· Hong Kong’s Hang Seng index advanced 0.86%

· China’s CSI300 surged 2.15%

· The MSCI Asia Pacific index rose 0.66%.

Stock of the day

Zoomlion Heavy Industry rose as much as 13.3% after it reduced the size of its non public share issuance, reducing the earnings dilution effectively.

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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