Trade of the Day: Stocks and futures rally as China gets a grip on virus; safe havens flat as risk-taking thrives
Quote of the Day: ““When investors are irrationally exuberant, there tends to be a desire to take on more risk and trade on margin. However, this isn’t the case now. The level of margin debt, which typically equates to a greater risk exposure for investors, decreased in the second half of 2018 and has tracked sideways through 2019. Investors are not mindlessly chasing the rise in US equities, despite headlines that would suggest the contrary,” said Benjamin Jones, senior multi-asset strategist at State Street Global Markets.
“This lack of exuberance, or euphoria suggests there is still plenty of upside for US equities.”
Stock of the Day: Ping An Healthcare rose as much as 12.6% in heavy volumes as the provider of medical services continues to draw attention amid the spread of the coronavirus in China and other parts of the world. The stock has now risen 27% in the past week.
Number of the Day:. $272. The new target price for Alibaba by HSBC, which has a buy rating on the e-commerce giant. This is an upgrade of 10% and a 23% upside from the current price. “Promising 2020 outlook; estimates ahead of consensus … 2020 should be the year in which Alibaba begins to benefit from its earlier investments while losses from new initiatives stabilize,” they wrote in a report.
Tip of the Day: “China healthcare sector surged significantly towards the spread of Wuhan coronavirus, and we believe most of the [share price] movements were sentimental and without fundamental ground,” said Jefferies analyst in a note published on Wednesday.”Share price performance is largely sentimental, but the healthcare sector is often the shelter during uncertainties. Share price delivered strong performance following the spread of the disease, but we believe many of these performances were not grounded and based entirely on speculations.”
Asian markets rebounded strongly after China’s prompt and transparent response to the coronavirus stirred hopes that Beijing was being proactive in dealing with the crisis even as more cases are being reported outside the mainland. Hong Kong Secretary for Food and Health Sophia Chan is to make a statement at a media briefing after the territory reported its first case of the virus.
The MSCI Asia Pacific ex-Japan index was up 0.71%, while Japan’s Nikkei 225 index rose 0.7%. Australia’s S&P ASX 200 benchmark jumped 0.94% and Hong Kong’s Hang Seng index’s 1.27% surge was driven by telecoms, technology and utilities sectors.
Adding to Hong Kong’s concerns about a recent Moody’s downgrade was a revision of the economic forecast by UBS, which now expects the territory’s GDP to contract in 2020. “We lowered our 2020 Hong Kong GDP forecast to -0.5%, against our previous forecast of 1.2% and the Bloomberg consensus of 0.2%. We also revised down our 2019 growth estimation to -1.3% from previous estimation of -1.1%. We maintain our 2021 forecast at 2.9%,” said William Deng, Greater China and North Asia economist of UBS Investment Bank.
“There have been some green shoots recently, but we do not think it is good enough yet,” Deng added. “Given the continuing challenges, we expect the government to announce more counter-cyclical growth support measures in the coming 2020/21 fiscal budget, focusing on improving public welfare, supporting corporates and employment, and promoting Hong Kong’s long-term growth.”
European stocks and US index futures were inspired by the Asian rally with the Stoxx Europe 600 index edging up 0.1% and S&P 500 futures up 0.4%.