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Mood soured by vaccine rollout, valuation worries

(ATF) Hong Kong: Asian markets were hammered amid worries that vaccine rollouts will slow and on concern that stocks are overvalued. Some analysts said the rally had over-reached their earnings recovery.

The vaccine rollout in Europe has lagged expectations with a row between the EU and drug maker AstraZeneca implying there would be only 31 million Covid-19 vaccines by the end of March, versus the expectation of 80 million.

S&P Global said in a report that the successful development of a few Covid-19 vaccines brings optimism that the pandemic will soon be beat while adding that a level of vaccination high enough to stop the disease may not happen anytime soon.

Recovery risk

“A potential new variant of Covid-19 that is more deadly and makes existing vaccines ineffective poses a further risk to sovereign credit recovery. In this scenario, a sustained improvement of sovereign credit metrics will be pushed further out by more than a year,” said S&P Global Ratings credit analyst Kim Eng Tan.

Japan’s Nikkei 225 index slid 1.53%, Australia’s S&P ASX 200 tumbled 1.93%, Hong Kong’s Hang Seng index dived 2.55%, and China’s CSI300 slumped 2.73%. Regionally, the MSCI Asia Pacific index retreated 1.81%.

US Treasuries edged up and the 10-year yield dipped a basis point to 1.01% while the dollar strengthened 0.1% against a basket of currencies to 90.75.

“Tactical investors digesting this good news and taking profit could well lead to a period of consolidation, or even correction,” said Tai Hui, Chief Asia Market Strategist, JP Morgan Asset Management.

“Market corrections are an integral part of any equity market. Our calculation shows that despite an average intra-year drop of 13.8% since the 1980s, the S&P 500 has delivered a positive return in 30 out of the past 40 years. We still expect the global economic recovery should accelerate in 2021, especially as vaccine delivery becomes more mature across the developed world and Asia.”

The yuan jumped 0.2% to 6.46 per dollar as a surge in China investments pushed up the Chinese currency amid growing appeal of the mainland markets.

“2020 FDI data suggest that China’s ‘first in, first out’ economic recovery amid the pandemic proved its supply-chain resilience and consumer market potential. China should remain an important FDI recipient longer-term and thus retain supply chains,” said Morgan Stanley economists.

Also on Asia Times Financial

Asia Stocks

  • Japan’s Nikkei 225 index slid 1.53%
  • Australia’s S&P ASX 200 tumbled 1.93% 
  • Hong Kong’s Hang Seng index dived 2.55%
  • China’s CSI300 slumped 2.73%
  • The MSCI Asia Pacific index retreated 1.81%

Stock of the day

Electronics company Smoore International fell as much as 7.3% after placing 60 million shares at an 8% discount to the market price. It was the second most heavily traded stock on the HKEX on Thursday. 

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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