Trade of the Day: Asian stocks, US equity futures rise pointing to a higher start at Wall Street; US Treasuries weaken as risk appetite makes a comeback
Quote of the Day: “Stimulus (in China) has been conducted with restraint and careful calibration. The directed irrigation of the economy could also reflect a gradual (if grudging) acceptance that GDP growth of 6% which is at the bottom end of the 6.0-6.5% target range for 2019 could be a new normal for China going forward,” said independent research firm CreditSights.
Stock of the day: Kasen International shares rose 470% after the company made a robust defense against a short seller’s attack. The shares had collapsed 91% the previous day after Blue Orca alleged that the company’s Cambodia investments was “illusory.” The shares are still 40% below the level they traded before the attack.
Number of the Day: 2.1 The % by which China revised its 2018 GDP upwards to 91.93 trillion yuan. Analysts say this should allow the target of doubling the size of the economy in the period 2010-2020 to be reached more easily in 2020, thus reducing the pressure to hit growth targets next year.
Tip of the Day: The US-China trade war and Brexit – to have less impact in 2020. Developed markets’ and emerging markets’ stocks are expected to outperform other asset classes. We expect stock markets to reach new highs before struggling later: Robeco said in its 2020 outlook.
Asian risk appetite returned with investors hopeful of a resolution to the US-China trade dispute which has raged for more than two years with President Xi Jinping saying China wants to work for a ‘phase one’ agreement and that his country did not want a trade war.
The regional MSCI Asia index rose 0.4% and Hong Kong’s benchmark Hang Seng index climbed 0.5%. In Hong Kong, technology and consumer cyclicals outperformed after a down day in the previous session. Insurance and healthcare provided most of the drag.
“Any resolution of the trade dispute – the so-called phase one agreement – will give some clarity and offer companies visibility which has been lacking so far hurting capex and fixed asset investments,” said Mark Konyn, CIO at AIA referring to the slowdown in China’s fixed asset investments.
China’s fixed-asset investment increased 5.2% year-on-year to 51.09 trillion yuan in January to October 2019, compared to a 5.4% rise in the first nine months of the year. This was the weakest reading on record.
The improved prospects of a deal boosted US futures and also triggered some selling in US Treasuries. Futures contracts on all three main US equity gauges rose indicating a firm opening at Wall Street.
“This is a political issue and its outcome is hard to predict and hence lack of visibility and volatility in markets. Resolution could be more forthcoming ahead of the US elections, however, and hence the more upbeat market sentiment as of late,” said Konyn.
Indeed, the flows into EM equity markets have remained strong. A Barclays report said the EM equity markets had received inflows for the fourth straight week.