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Investors cheer as China rebound sustained


(ATF) Hong Kong and mainland Chinese markets eked out gains after Wall Street’s tech titans impressed with their earnings and better than expected economic data from the world’s second largest economy. But rising infection numbers in Japan and Australia weakened their stock markets.

China’s PMI readings point to steady recovery momentum in July despite the floods along the Yangtze River and some local second waves of Covid-19, said Ting Lu, Chief China Economist at Nomura.

The National Bureau of Statistics (NBS) published a PMI reading of 51.1 in July, against 50.9 in June with all sub-indexes suggesting stronger growth momentum in the manufacturing sector.

The data “signalled a continued recovery in factory activity, at a faster pace than in June and also above expectations,” said Goldman Sachs analysts in a note but warned that “recovery pace is still uneven however, as smaller-sized manufacturing enterprises still lag behind larger enterprises.”

Hong Kong’s Hang Seng index has edged up 0.2%, and China’s CSI 300 inched up 0.1%.

“We expect China’s official manufacturing PMI to remain at around 51.0 in coming months, with risks slightly to the downside,” Nomura’s Lu said.

Stocks down in Japan and Australia

Stocks in Australia and Japan tumbled amid the spike in coronavirus infections. The Nikkei 225 slid 2.13% and the S&P ASX 200 was down 1.82%.

Overnight, the Dow Jones Industrial Average slid 0.85%, the S&P 500 dipped 0.38%, but the Nasdaq Composite added 0.43% as tech behemoth Apple delivered blowout results.

Asian credit markets remain firm with the Asia IG index moving in a basis point to 73/74 bps and investors awaiting the busy pipeline to resume flowing after Redco Properties bonds priced at a yield of 12.875% after orders exceeded $1 billion.

Safe havens were well bid with the US 10-year Treasury at 0.54% and gold hovering above $1,960 per ounce.

“Gold looks like it has stalled, but hardly corrected given its significant rise. It still has plenty to support it,” said James Steel, HSBC chief precious metals analyst. “The Fed said yesterday that it is ready to do more, but the onus is on fiscal policy in many countries. In the US, White House Chief of Staff Mark Meadows said they are ‘nowhere close’ to a deal on fresh US fiscal stimulus. These issues support bullion. The Covid-19 pandemic also continues to move across the world creating uncertainty.”

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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