Asia Markets wrap

Hong Kong: Investors piled into risky assets on hopes the United States will unveil fresh stimulus measures but concerns about volatility reined in gains as people are mindful about the potential for problems in the transition of power after the US elections.

“Hopes that a US fiscal stimulus package could be just around the corner, in addition to upbeat US data, is driving demand for riskier assets,” Fiona Cincotta, a market analyst with City Index, said.

“Additional fiscal stimulus could be just around the corner in the US after US Treasury Secretary Steve Mnuchin said that talks are progressing very well. He offered a $1.6 trillion package and said that an understanding could be reached today (Thursday). Signs of upcoming fiscal relief in the world’s largest economy is boosting risk appetite and the risk on trade, supporting stocks as reflected by rising equity markets and US futures and demand for riskier currencies.”

The election outcome could be delayed or worse – contested, leading to an escalation in political instability and greater market volatility, Eastspring Investments analysts said.

“The election outcome could take weeks to process and the final tallies may change significantly after election day as a result of absentee and mail-in ballots that arrive after in-person ballots are counted. Second, recounts and legal disputes may result in a failure to produce a legitimate result, leading to an escalation in political instability and uncertainty. Third, a contested election is also possible in which it is not decided by the popular vote or Electoral College but requires the intervention of the US Congress or Supreme Court to determine the outcome. For these reasons, we expect to see increased market volatility in the coming weeks,” Kelvin Blacklock, head of Eastspring Portfolio Advisors at Eastspring Singapore, said.

Risk of gridlock

Macro research firm BCA Research said in a report there was a risk of gridlock following the November US elections. 

“A Biden White House and a Republican senate would result in policy paralysis, which would hurt a fragile economy. The only way to get more support to the economy when it needs it next year would be via acute market pressures. Thus, in this outcome, stocks would be much more vulnerable than in our base case scenario,” they said in a note. 

Trading volumes were truncated as China, South Korea, Taiwan and Hong Kong were shut for holidays.

The British pound tumbled, ending a three week run of straight gains on reports the Brexit talks were failing. 

And Japanese stocks stopped being traded after a technical glitch forced the suspension of all share trading in Japan. The Tokyo Stock Exchange said trading would be halted all day and that it was not sure when it can recover its systems.

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Asia Stocks

· Japan’s stock market suspended trade after a technical glitch

· Australia’s S&P ASX 200 advanced 0.98% 

· The MSCI Asia Pacific index added 0.23%.

Stock of the day

Indonesian developer Alam Sutera bonds fell by 1-2 points after Fitch lowered its rating to C from CCC on the view that the proposed exchange constitutes a distressed debt exchange. Its 2022 bonds fell a point to 58 cents on the dollar.

This report appeared first on Asia Times Financial.

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