Hong Kong: Investor sentiment received a boost from reports that China will speed up its purchase of agricultural products, calming fears the trade agreement between the world’s two biggest economies could be at risk.

Economic optimism and growing hopes the coronavirus pandemic was being brought under control in China also lifted the mood.

Bloomberg News reported on Friday that China, the world’s top soybean importer, intends to step up buying of everything from soybeans to corn and ethanol after purchases fell behind due to coronavirus disruptions.

Japan’s Nikkei 225 extended morning gains closing 0.55% higher and Australia’s S&P ASX 200 index was off morning highs, but ended up 0.1%. Hong Kong’s HSI benchmark climbed 0.64% and China’s CSI300 index jumped 1.34% after the Bloomberg report.

That gave a further boost to Chinese equities, which were already rallying after reports of a virus containment.

“The epidemic in Beijing has been brought under control,” Wu Zunyou, chief epidemiologist of China’s Center for Diseases Prevention and Control, said, according to a Reuters report.

Investors remain optimistic ahead of a meeting about a proposed 750 billion-euro ($840 billion) European program to help their economies rebound from the Covid-19 lockdown, with Germany and France pushing for a deal to be wrapped up next month.

Quadruple witching

Heightened volatility awaits investors ahead of the quarterly event known as quadruple witching. Quadruple witching, occurs on the third Friday of the month of every quarter, in March, June, September, and December, and refers to the simultaneous expiration of single-stock options, single-stock futures, and stock-index options and stock-futures.

In the week ahead, PMI updates in US, Europe, Japan and Australia will be assessed for the impact of lockdown restrictions being eased earlier this month.

“The PMI [purchasing manager index] surveys provided an early indication that the worst of the economic impact from the virus outbreak appears to have hit in April, with the global PMI staging a record rise in May, albeit remaining worryingly weak by historical standards,” Chris Williamson, chief business economist at IHS Markit, said. “With lockdowns having increasingly eased into June, further gains in the PMIs will be needed to corroborate growing expectations that economic recoveries are gaining traction.”

And as there is growing conviction authorities are able to control the pandemic, green shoots are beginning to emerge and be noticed.

“Over the last two weeks, there has been a more broad-based improvement in growth trends around the world. More economies have now joined in the recovery and more indicators within each economy are also improving. High frequency indicators suggest that we are seeing a further acceleration in growth in June as compared to May,” Morgan Stanley analysts said in a note.

Credit markets in Asia recouped morning losses with the Asia IG index now trading unchanged from yesterday’s levels at 84/85 basic points (bps) and sovereign CDS wider by 1/2-1 bp as investors digested recent new issues and monitored the progress of a strong pipeline.

Sino-Ocean Holdings has hired banks for a potential Reg S dollar bond as a growing number of Chinese issuers hit the market. “Chinese and Philippine issuers kept up the momentum in the Asian dollar-bond primary market despite a weaker market sentiment,” CreditSights said in a note.

“Demand continues to be strong, as a number of transactions priced through fair value and the initial price guidance to final price guidance.

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Asia Stocks

# Japan’s Nikkei 225 rises 0.55%

# Australia’s S&P ASX 200 edges up 0.1% 

# Hong Kong’s Hang Seng index climbs 0.64%

# China’s CSI300 jumps 1.34%

# The MSCI Asia Pacific index edges down 0.1%.

Stock of the day 

Evergrande Group, China’s second-largest developer, rose as much as 4.7% after it announced it had made a buyback of shares.

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