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Investors turn watchful ahead of US elections

(ATF) Hong Kong: Investors are tentatively pricing in a Democrat win at the US elections, while expecting a generous US stimulus package early next year. As the presidential campaign heats up, financial markets are cautious about extending positions moving in a narrow range. 

Japan’s Nikkei 225 index edged up 0.18% and Hong Kong’s Hang Seng index advanced 0.54% but Australia’s S&P ASX 200 dipped 0.11% and China’s CSI300 fell 1.25% amid expectations of more US-China tensions in the run-up to the November 3 ballots. On balance the MSCI Asia Pacific index added 0.43%.

“We can expect the markets to continue pricing-in a Biden win, something which has begun in earnest in recent weeks,” said Nigel Green, the CEO of advisory firm deVere Group.

“Conventional wisdom suggests a Democratic win would be negative for markets due to higher taxes, more regulation, and higher spending amongst other things. The massive extra stimulus of up to $3 trillion wanted by Democrats in January would buoy the markets and would have investors think about a broader-based economic recovery – rather than a narrower, tech-heavy one.”

The US dollar was marginally weaker against a basket of currencies down 0.2% at 92.79, which lifted in part gold prices 0.3% to $1,911 per ounce.

US Treasuries were steady after the overnight rout with the 10-year yield at 0.86%. They had struck four month highs on Thursday on hopes a fiscal stimulus bill will be passed. 

Key China meeting looms

Next week, China’s top leaders will chart the country’s economic course for 2021-2025 at a key meeting starting on Monday, seeking to balance growth and reforms to avoid stagnation amid an uncertain global outlook and deepening tensions with the United States.

“We think the [14th] Five Year Plan, will be based on estimated potential growth of 5-6%, with a greater focus on employment, income redistribution and social security to release China’s consumption potential,” Standard Chartered Bank economists said in a note. “Investment in technology may be increased via state support and private-sector participation. We see a renewed impetus for Renminbi internationalisation, aimed at reducing reliance on the USD-dominant financial system.”

But in macro-economic policy they expect China will refrain from stimulating growth to above-potential level to preserve policy space as the central bank has shown its disapproval of zero or negative interest rates, and will be cautious about expanding its balance sheet.

Hong Kong, Korea, and Taiwan will report third quarter GDP numbers next week, and it is expected that export strength will outweigh domestic demand weakness.

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Asia Stocks

· Japan’s Nikkei 225 index edged up 0.18%

· Australia’s S&P ASX 200 dipped 0.11% 

· Hong Kong’s Hang Seng index advanced 0.54%

· China’s CSI300 fell 1.25%

· The MSCI Asia Pacific index added 0.43%.

Stock of the day

CNOOC rose as much a 7.7% after the company announced improved production volumes in the third quarter.


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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