Hong Kong: Markets are looking past the US-China tensions in the absence of any fresh announcements or measures, with investors embracing risk as the economic rebound takes hold with more countries starting to open up.

The coronavirus pandemic infection count has risen to 6.3 million with over 375,000 deaths, but Western Europe and Asia have seen waning infection tallies, which has encouraged governments in those regions to ease restrictions.

The China Association of Automobile Manufacturers said vehicle sales in May were estimated to have risen 11.7% on year, as the world’s second largest economy starts to warm up.

But gains were capped as investors worried about tensions between US and China, plus recent protests in the US – the worst unrest in decades – also weighing on sentiment.

Japan’s Nikkei climbed 1.19%, South Korea’s benchmark Kospi rose 1.1% and Australia’s S&P ASX 200 index added 0.27%.

Hong Kong’s Hang Seng benchmark firmed 1.11% as post-lunch buying boosted stocks and China’s CSI300 edged up 0.3% to reverse morning losses.

‘Relatively resilient’

“While the coronavirus crisis will likely fuel US-China friction in the months to come, we think equity investors shouldn’t let these tensions overshadow investment opportunities in China, where the economy is recovering and earnings have remained relatively resilient,” John Lin and Stuart Rae of AllianceBernstein said in a note.

Markets are betting improvements will be sustained after China’s macro data turned the corner, reflected in the CSI300’s gains since the last week of May, with the index on the cusp of positive territory year to date.

“We see the economy likely returning to near-trend growth by late 2020, supported by policy stimulus, especially on the monetary front. China’s economic restart – along with that in East Asia more broadly – underpins our modest tactical overweight in equities and credit in Asia outside Japan,” said a note from BlackRock Institute.

“We see the Chinese government’s recent economic policy actions as lending further support for the restart. A shift in tone on monetary policy – potentially opening the spigot for increased credit growth– is particularly significant. It adds to fiscal stimulus that so far hasn’t been overwhelming, in our view. Together with other positive survey data, this points to a potential strong upturn in economic growth in the second quarter,” the note said.

Credit markets were broadly upbeat as the Asia IG index moved in by 2 basis points at 98/99 bps with Hong Kong Electric  and Sands China in the market with global bond offerings.

Sovereign CDS were 1-2 basis points tighter with South Korea’s 5-year contract an underperformer, widening a basis point to 27/28 as the country’s GDP contracted in the first quarter and the government revised down its 2020 economic growth outlook to 0.1%. The downgrade was in sharp contrast to the previous expectation of 2.4% expansion unveiled six months earlier.

Also on Asia Times Financial:

Dollar-hungry China changes tune on foreign investment

China redraws political map to aid mega-city growth

Trump threatens to mobilise military against protesters

Foreign Exchange: A Hong Kong dollar peg to the euro instead of the dollar?

Asia Stocks

· Japan’s Nikkei 225 climbed 1.19%

· Australia’s S&P ASX 200 added 0.27% 

· Hong Kong’s Hang Seng index rose 1.11%

· China’s CSI300 edged up 0.3%

· The MSCI Asia Pacific index 1.18%.

Stock of the day 

Power company Huadian Fuxin rose 60.2% after trading resumed and the company announced it will be bought by and absorbed into Fujian Huadian. The stock closed at HK$2.42 a share, just below the cancellation price of HK$2.50 to be paid by the acquirer.

This report appeared first on Asia Times Financial

Asia Times Financial is now live. Linking accurate news, insightful analysis and local knowledge with the ATF China Bond 50 Index, the world's first benchmark cross sector Chinese Bond Indices. Read ATF now.