Asia Markets wrap
Asia Markets wrap

Hong Kong: Global risk sentiment improved after data from the world’s second largest economy showed China’s economic growth in August accelerated with gains in output, retail sales, and investment.

“We believe China’s post-COVID monetary policy easing cycle has ended amid a sustained economic recovery and strong housing sales,” Standard Chartered economists said in a note. “Growth in August surprised to the upside by a wide margin. Moreover, the economic recovery in China has become more broad-based.”

The fading hopes of a China rate cut and the robust economic recovery boosted the yuan to a 16-month high.

Japanese stocks underperformed – still reeling from Tankan survey which showed that manufacturers remained pessimistic for the 14th straight month in September – with investors remaining edgy ahead of the new Prime Minister (Suga) taking over on Thursday.

Australian stocks were flat after central bank minutes pointed to the need for additional support and indicated the monetary authorities wish for a weaker currency.

“They considered it likely that fiscal and monetary support would be required for some time given the outlook for the economy and the labour market,” the minutes said. “While members noted that the Australian dollar was broadly aligned with its fundamental determinants, a lower exchange rate would provide more assistance to the Australian economy in its recovery.”

China’s industrial output picked up to 5.6% from 4.8% on year, versus an expected 5.1%. Fixed asset investments in August improved to 7.6% on year from 6% in July while retail sales turned positive to 0.5% from -1.1%.

“A tightening labour market and revival in consumer confidence suggests that the recovery in services activity has further to run,” said Julian Evans-Pritchard, Senior China Economist at Capital Economics. “Meanwhile, growth in industry and construction is likely to remain strong since fiscal spending is set to be ramped up further during the rest of the year and the recent surge in industrial profit growth has also boosted the prospects for manufacturing investment. Taken together, the economy is on track to return to its pre-virus growth rate before the end of the year.”

Significant advancements in vaccine trials by drugmakers is also boosting confidence that economies will start humming again.

Vaccine ‘progress’

“We have made significant progress in the development of a potential vaccine candidate BNT162b2 to help meet the global public health need. Our Phase 2/3 trial is ongoing and we are likely to expect data demonstrating its safety and efficacy by October-end,” a Pfizer spokeswoman said in an emailed response.

The company said it is working with its partner BioNTech to “currently aim to supply globally up to 100 million doses by the end of 2020 and approximately 1.3 billion doses by the end of 2021.”

China’s benchmark CSI 300 advanced 0.8%, Hong Kong’s Hang Seng index climbed 0.38% and Australia’s S&P ASX 200 ended flat after the central bank minutes noted the weak credit off-take despite the low interest rates and further monetary policy measures will depend on fiscal policy.

“We think the upcoming federal and state budgets will contain enough stimulus to reasonably expect a relatively strong recovery in 2021. If this is the case, then we think the RBA will hold off from taking further steps until sometime into 2021,” ANZ economists said in a note.

But that also underlined the downbeat outlook for the economy in the current year.

“We forecast the Australian economy to shrink 6.4% through 2020, before rallying strongly next year. Growth in 2021 is expected to reach 5% by year-end, slowing to a still strong 3.2% through 2022. Even with the strong rebound in 2021, we don’t expect GDP to return to its pre-pandemic level until the third quarter of 2022,” ANZ economists said in a note.

Asian credit markets were flat with the Asia IG index unchanged at 57/58 bps. The primary market activity is frenetic with deals like AVIC International’s 10year bondsBeijing Ent green bondsHenan Water’s 5-year bondsChina Three Gorges dual-tranche offeringTingyi Holding’s new mandateTimes China’s new bond offering, and Tongyang Life’s 30-year bond.    

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Foreign Exchange: Yuan resumes climb on August jump in domestic demand 

Asia Stocks

· Japan’s Nikkei 225 index eased 0.44%

· Australia’s S&P ASX 200 edged down 0.08% 

· Hong Kong’s Hang Seng index climbed 0.38%

· China’s CSI300 jumped 0.8%

· The MSCI Asia Pacific index fell 0.35%.

Stock of the day

China Evergrande New Energy Vehicle Group fell as much as 15.2% after it said it had placed 2% of its share capital with investors at a discount of 20% to the existing market price in a HK$4-billion fundraising exercise.

This report appeared initially on Asia Times Financial.