Asia Markets wrap

Hong Kong: Asian markets looked past the US-China tensions as economic recovery prospects lifted sentiment, but the tech sector woes continue to keep investors cautious.

Japan’s Nikkei benchmark rose 0.80%, China’s CSI 300 index advanced 0.54% and Hong Kong’s Hang Seng index edged up 0.14%, erasing the morning’s losses.

Australia’s S&P ASX 200 index also had a late kick to finish higher after drugmaker CSL said it would supply a coronavirus vaccine shortly. “Heads of Agreement signed between CSL and the Australian Government to supply 51 million doses of University of Queensland vaccine to Australia, with first doses scheduled for release from mid-2021 following successful clinical trials,” the company said in a statement.

Investors are leaning towards US Treasuries with the 10-year yield down 3 bps to 0.68%. The US dollar extended its recovery with the unit trading at 93.28 versus a basket of currencies. Gold dipped 0.8% $1,913 per ounce.

Growing hopes of a sustained economic recovery is driving investor sentiment, with China reporting a surprisingly positive export performance. Morgan Stanley expects to see the global and developed markets economies returning to pre-Covid-19 levels a quarter ahead of their original forecast.

“China, which has been leading in the recovery, is likely to start growing at pre-Covid-19 GDP levels from 4Q20. We believe that China would have seen its GDP rise 8.4% above pre-Covid-19 levels by 2Q21,” they said in a note. “We expect emerging market economies excluding China (EMXC) to reach pre-Covid-19 levels by 1Q21, led by the heavyweight Asian EMs.”

Nomura economists raised their forecast for China’s economic growth in 2020 and 2021 to 2.2% and 9.4%, respectively, from 1.7% and 8.8%. It raised Q3 and Q4 real GDP growth forecasts to 5.2% y-o-y and 5.7%, respectively, from 4.3% and 4.5%.

“China’s recovery is undoubtedly impressive, especially when compared to other major economies that remain mired in the pandemic,” Ting Lu, Nomura’s Chief China Economist said.

Earlier in the day markets got off to a jittery start after US President Donald Trump made aggressive comments about job losses and blamed China raising the spectre of heightened tensions.

“We lose billions of dollars and if we didn’t do business with them we wouldn’t lose billions of dollars. It’s called decoupling, so you’ll start thinking about it,” he said referring to a future where the world’s two biggest economies no longer did business with one another. His remarks follow his comments after US jobs data last week where he criticised election rival Joe Biden for exporting American jobs to China.

UBS CIO said in a report the Sino-US Phase-1 trade deal should stay intact in the lead-up to the US election, although it was unlikely to be met with retaliation.

“China will also likely stay calm and take calibrated moves to avoid severe confrontation with the US, even when facing the Trump administration’s high-profile challenges, amid recurring headline news on the risk of financial and tech decoupling,” they said in a note.

Asian credit markets were firm with the expectations of low rates keeping alive the search for yield. The Asia IG index was half a basis point tighter at 57-1/2/58-1/2. Primary market deals such as ENN Energy’s greenbondBOC Aviation’s 10-year dealLinyi City’s new mandate, and UOB’s tier 2 bonds are keeping investors busy.

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Asia Stocks

# Japan’s Nikkei 225 index added 0.80%

# Australia’s S&P ASX 200 advanced 1.06% 

# Hong Kong’s Hang Seng index edged up 0.14%

# China’s CSI300 rebounded 0.54%

# The MSCI Asia Pacific index rose 0.46%.

Stock of the day

Biotech firm CSL Ltd rose as much as 3.1% after it said it would supply millions of coronavirus vaccines, should they be developed, to the Australian federal government.

This report appeared first on Asia Times Financial.

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