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Markets edgy on renewed outbreaks, US-China tensions

(ATF) Hong Kong: Investors were broadly cautious as a new wave of infections in China and a warning by the infectious disease expert Anthony Fauci on a premature lifting of lockdowns, hurt sentiment.

But Indian markets were lifted by a $265-billion coronavirus relief package, equivalent to a tenth of the economy, but the funding details are still awaited as New Delhi emphasised a self-reliant economy. The Bombay Stock Exchange benchmark the Sensex added 2.03%. Finance Minister Nirmala Sitharaman will announce the details later.

“Indian equities and the Indian rupee – which has exhibited a positive correlation with domestic equities – have been a view on domestic growth, since India is one of the most domestically focused markets,” said Gaurav Saroliya, director of macro strategy at Oxford Economics.

“Alongside monetary easing by the RBI, we think this move, the details of which are still awaited, will boost market confidence that India will be able to limit the economic costs of the lockdown, which our macro team earlier estimated at around 6% of annual GDP.”

Elsewhere the tone was more subdued after new infection cases emerged near the Russian border and in Wuhan, the original source of the pandemic where the authorities recently eased the draconian measures that had restricted travel and economic activity. Sentiment was dampened as US Republican senators proposed legislation that would empower president Donald Trump to sanction China over its handling of the coronavirus outbreak.

Oil prices fell with the WTI easing 0.5% and Brent dropping 1.9% even ahead of the OPEC’s oil market report. Overall, the MSCI Asia Pacific ex-Japan index rose 0.37% with the mainland China CSI 300 benchmark adding 0.2% amid optimism the region would recover faster than US markets.

“Even though the Covid-19 pandemic is going to hurt global growth, Asia on average will take a smaller hit than the US. The weaker short-term growth prospect and a higher valuation suggested US equities stood at a relatively exposed spot when the bizarre howled,” Alicia Garcia Herrero, chief Asia Pacific economist at Natixis, said in a note.

“Unlike Asian equities, which have encountered several corrections since 2013, the US stocks have climbed steadily with an increasingly high P/E ratio.”

Japan’s Nikkei 225 fell 0.49% and Hong Kong’s Hang Seng index fell 0.27% while Australia’s S&P ASX 200 rose 0.35%

Credit markets were also off-colour with the Asia IG index 2 basis points wider at 117/119bps and sovereign CDS 1-3 bps wider.

Financial markets are looking ahead at a speech by US Federal Reserve chairman Jerome Powell at a virtual event with the Peterson Institute for International Economics in Washington, even as Fed fund futures hover near negative territory.

ATF China Bond 50 Index: Bonds mixed as markets mull virus outbreaks

Also on Asia Times Financial

China, Australia edge toward Covid-19 trade war

Senators want Trump to have power to sanction China

China factory deflation to trigger PBoC moves

Foreign Exchange: Yuan hurt by new coronavirus China clusters

Asia Stocks

· Japan’s Nikkei 225 eased 0.49%

· Australia’s S&P ASX 200 added 0.35% 

· Hong Kong’s Hang Seng index declined 0.27%

· China’s CSI300 advanced 0.2%

· India’s BSE Sensex climbed 2.03%

· The MSCI Asia Pacific index rose 0.37%.


Stock of the day 

E-commerce platform Meituan Dianping rose as much as 6.9% following a block trade of 510,000 shares at a turnover of HK$60.843 million this morning.  A block trade is a high-volume transaction in a security that is privately negotiated.

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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