A soybean farm in the United States. China had agreed to buy more US farm products in a phase one trade deal. Photo: Facebook

Trade of the Day: Asian stocks extend gains; oil and British pound jump; gold loses luster.

Quote of the Day: “Manufacturers have been moving out of China at an accelerated pace due to the US-China trade war, but the relocated investment is largely labor-intensive, while foreign direct investment (FDI) in China’s high-tech manufacturing continued to outpace the country’s total FDI growth, reinforcing China’s ongoing manufacturing upgrade. The recent de-escalation of US-China trade tensions … is unlikely to significantly slow relocations, as the extent of tariff relief remains uncertain and rising labor costs in China will continue to drive low-end manufacturing to Southeast Asian countries,” said Fitch Ratings analysts in a commentary released on December 25 titled Industrial Relocation Supports China’s Manufacturing Upgrade.

Stock of the day: Hansoh Pharma, a Chinese drugmaker, rose as much as 6.9% after it said it had obtained approval from the National Medical Products Administration of the People’s Republic of China for a drug used in the treatment of patients with type II diabetes. China has an estimated 116 million diabetics, by far the highest number of any country.

Number of the Day: $593 million – the value of shares WeWork co-founder Adam Neumann could receive in lieu of profits interest when the loss-making company goes public. Neuman left the office space provider in September with a $1.6 billion severance package.

Tip of the Day: “The surge in China’s debt from around 150% of GDP in 2009 to c.260% has tied the hands of policymakers. We predict that China’s GDP growth will slide further to 5.7% in 2020 and 5.6% in 2021, unless the government puts in place a more aggressive stimulus program,” said Nariman Behravesh, IHS Markit Chief Economist.

Asian risk appetite was robust as investors applauded China’s stepped-up purchases of US soybean as the latest in signs the rift between the world’s two largest economies was healing. China’s inbound shipments from the US surged to 2.6 million tons, the highest since March 2018, and up from about 1.1 million tons in October. There marked a sharp turnaround from November 2018, when China’s purchases dropped to zero from 4.7 million tons just a year earlier, dealing a blow to US growers as the trade war gathered momentum.

MSCI Asia-Pacific ex-Japan index surged 0.55% to 555.25, a level not seen since mid-2018. It has risen about 16% so far this year. Japan’s Nikkei index fell 0.3% but it has risen almost 20% this year, its biggest annual increase since 2013. Hong Kong’s Hang Seng index was up 1.3% with basic materials, energy and telecom shares driving the gains.

China property companies had a boost from the latest measures taken by the government to promote social mobility by reforming the hukou system. Country Garden jumped 3.5% and Evergrande surged 3.9% – they are two of the biggest property companies in China. Guidelines issued by the State Council said restrictions on residence registration will be completely lifted for cities with a residential population of less than three million in urban areas. Conditions for residential settlement will be relaxed for large cities with a residential population of three million to five million in urban areas. These changes follow President’s Xi Jinping’s article earlier this month, which said “the structure of economic development is undergoing profound changes, with central cities and city clusters becoming the major vessels for development.”

European stocks continued where Asian traders left with the Stoxx Europe 600 Index 0.2% higher and the UK’s FTSE 100 Index up 0.3%. Wall Street is set to extend overnight gains with futures on the S&P 500 Index climbing 0.1%. Overnight, all three Wall Street benchmarks posted record closing highs with the Nasdaq crossing 9,000 for the first time.

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