Asia Markets wrap

Hong Kong: Growing economic confidence lifted Asian markets from the day’s lows with most bourses finishing in positive territory on Friday although investors remain cautious because of US-China tensions.

China reported its total social financing picked up momentum in August, faster than market expectations and driven by soaring local government special-bond issuance. The faster rise reflected Beijing’s policy stimulus and markets’ positive reaction to the stimulus.

“The August credit data may be positive for equities, especially those cyclical names related to infrastructure investment, but may be negative for bonds, as the chances of RRR and rate cuts in the near-term becomes much smaller,” Ting Lu, Chief China Economist at Nomura, said.

Indeed China equities outperformed with the benchmark CSI 300 rising 0.99%. Elsewhere in the region, Japan’s benchmark the Nikkei 225 rose 0.74%, and Hong Kong’s Hang Seng index advanced 0.78%.

But Australia’s S&P ASX 200 eased 0.83%, amid worries about virus-related restrictions and heightened tensions with China, its biggest trading partner, after Beijing accused the Australian embassy in China of obstructing law enforcement by sheltering two journalists wanted for questioning.

The euro remained strong after the ECB meeting on Thursday kept rates on hold and the central bank indicated it is not intervening in the foreign currency market. But the British pound is under pressure amid political uncertainty and the repricing of no-deal Brexit risks. It has lost 3.7% this week alone.

Much work needed for Brexit deal

statement issued by the European Commission’s Michel Barnier showed the two sides still have considerable work to do on a Brexit deal. Barnier said the EU had tried to find solutions that fully respect the UK’s sovereignty, notably in regard to the role of the European Court of Justice, the future legislative autonomy of the UK, and fisheries.

“However,” he said, “the UK has not engaged in a reciprocal way on fundamental EU principles and interests. Significant differences remain in areas of essential interest for the EU. The UK is refusing to include indispensable guarantees of fair competition in our future agreement, while requesting free access to our market.

“We are still missing important guarantees on non-regression from social, environmental, labour and climate standards. Modern trade agreements are about ensuring sustainable and fair partnerships with high standards in areas like the environment, climate, employment, health and safety, and taxation.

“The UK has moreover not engaged on other major issues, such as credible horizontal dispute settlement mechanisms, essential safeguards for judicial cooperation and law enforcement, fisheries, or level playing field requirements in the areas of transport and energy… More clarity is needed for the EU to do the assessment for the third-country listing of the UK.”

Meanwhile, the European Central Bank kept its rates unchanged as many expected but the euro strengthen after President Christine Lagarde reiterated at a press conference that the ECB does not target the exchange rate. The euro is up 0.4% at $1.18.

“President Lagarde used the press conference to send a slightly more positive message about the outlook for inflation and GDP growth, and dampened expectations of an early top-up to the €1.35 trillion PEPP envelope. We have pencilled in an increase of €500bn for next March,” research firm Capital Economics said in a note.

Geopolitical clouds

Geopolitical clouds hover over markets. US President Donald Trump said there would be no extension of a deadline for the sale or closure of video-streaming site TikTok, a lightning rod for tensions between US and China. “It’ll either be closed up or they’ll sell it. So we’ll either close up TikTok in this country for security reasons, or it’ll be sold,” Trump said while adding there would be no change in the September 15 deadline.

A Bloomberg report said the company likely needs beyond the US executive order ban on Sept. 20 to reach an agreement. But Trump has said he wants a deal by Sept. 15, as the ban on TikTok’s US operations that he signed last month in a bid to force a sale requires the company to act by Sept. 20.

In sign of more pushbacks against Chinese companies, US Senator Marco Rubio, asked for a national security review of plans by General Nutrition Centers (GNC) to sell itself to Harbin Pharmaceutical Group.

In the week ahead central banks in Japan, Taiwan and Indonesia are due to meet, with all of them likely to keep interest rates unchanged. China’s industrial production, retail sales, fixed asset investment, and home sales will also be in focus. ING Bank’s Greater China Economist Iris Pang doesn’t see growth for these differing much from the pace in July.

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Asia Stocks

· Japan’s Nikkei 225 index rose 0.74%

· Australia’s S&P ASX 200 retreated 0.83% 

· Hong Kong’s Hang Seng index added 0.78%

· China’s CSI300 climbed 0.99%

· The MSCI Asia Pacific index edged up 0.34%.

Stock of the day

Xinyi Solar rose as much as 7% after it placed shares at a premium to the market price in a $350 million fund raising for financing capex. 

This report appeared initially on Asia Times Financial.

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Umesh Desai

Umesh Desai is Asia Times Finance Editor. Prior to his current role he was at Reuters for 19 years before which he was a credit ratings and equity research analyst. A chartered accountant by training, he is based in Hong Kong.