Trade of the Day: Shares, futures down on US legislation/China warning; Oil tumbles on supply glut; investors flee to safe havens US Treasuries, gold
Quote of the Day: “After painful lessons learnt in the past, ‘slow and steady’ is the new approach by The People’s Bank of China. The overall weakness of the global economy, the decelerating domestic housing sector as well as the renewed easing from the Fed, is likely to trigger further easing by the PBOC,” said Artur Baluszynski, Head of Research at Henderson Rowe.
Stock of the day: Shui On Land rose over 3% in a bearish market after it said it had acquired land in Shanghai for development projects. SCMP said Shanghai accounted for more than 75 billion yuan (US$10.7 billion) or about 70% of the Hong Kong-listed group’s assets, making it one of the biggest landlords in the city.
Number of the Day: 7.0 UBS forecast for the Chinese yuan against the dollar for 2020. “We expect Asian currencies to be modestly stronger against the US dollar in the coming year. We forecast USDCNY around 7.0 throughout 2020, with US-China trade outcomes the key driver.”
Tip of the Day: Chinese companies are expected to deliver double-digit earnings growth in 2020. Risk-reward for Chinese equities remains attractive at current valuation: Mike Shiao, Chief Investment Officer, Asia ex Japan, at Invesco said in his 2020 outlook published on Wednesday.
Asian markets were mostly risk-off on Wednesday amid fears the passage of US legislation, seen as supporting the protesters in Hong Kong, could draw retaliation from Beijing as the world’s two largest economies remain locked in a trade war which has lasted for two years.
Hong Kong stocks saw underperformance by insurance, industrials and consumer non-cyclicals with the Hang Seng index retreating 0.75%. The basic materials sector outperformed with a 0.58% gain.
Investors are worried the dithering on a resolution is damaging to both economies and likely to spread worldwide on supply chain dislocation. Earlier in the day, China reduced its lending benchmark to help lower corporate borrowing costs as companies struggle to cope with falling demand and shrinking margins.
“It has been a strong year and markets have performed well across assets. While some profit booking may emerge into the year end, the rally could get a boost if the impending jobs and PMI numbers are strong and if the trade deal between the US and China doesn’t take a southward turn,” said Binay Chandgothia, the HK-based Managing Director and Portfolio Manager of multi-asset portfolios at Principal Global Investors.
“We are maintaining a slight risk-on bias with an overweight to equities, short-duration credit bonds and underweight cash. We are also looking to add duration incrementally if rates sell-off,” he said.
The rate market has had a strong year on the back of monetary easing by central banks and these gains could be at risk next year as governments look to boost their economies using the fiscal stimulus route as the monetary option is limited.
Fitch Ratings said it expects widespread monetary easing in 2H19 to be followed by varying degrees of fiscal easing in 2020.
“Fiscal space and the degree to which growth is lifted by stimulus will be important considerations in determining what, if any, rating implications might follow policy changes,” it said in a report published on Wednesday.