Market Close Jan 05

Caution ahead of Georgia runoffs; HK gets telco boost

NYSE decision boosts Chinese telcos; Georgia runoff seen impacting Biden agenda; Yuan seen in sustained rally 

Caution ahead of Georgia runoffs; HK gets telco boost
All eyes will be on US President Donald Trump's actions over the next couple of days, when the final Senate seats will be decided in Georgia and Biden's election win will be certified. File photo: December 12, 2020 by Cheriss May for Reuters.

(ATF) Hong Kong: Asian markets were cautious ahead of the key Senate election in the US state of Georgia that could influence Joe Biden’s reform agenda when he takes over as President.

But Hong Kong and mainland China stocks rallied ahead of the US Department of Transportation's publication this week of the final list of Chinese companies that will be subject to an investment ban. Analysts said that the New York Stock Exchange’s decision to reverse the delisting of Chinese telcos means they will not be on the US investment ban list.

Hong Kong’s Hang Seng index added 0.64%, China’s CSI300 leapt 1.91%, after the NYSE said it is no longer going ahead with the delisting action initiated against the three Chinese telcos. Regionally the MSCI Asia Pacific index advanced 0.28%.

Japan’s Nikkei 225 index dipped 0.37% and Australia’s S&P ASX 200 edged down 0.03% as investors mulled impact of the Georgia Senate runoff which will determine Joe Biden’s ability to pursue his preferred economic policies, including issues like rewriting the tax code, boosting stimulus and infrastructure spending.

The House and the Senate are scheduled to certify Biden's election win on Wednesday, and markets are expecting more chaos as some Republicans have pledged to vote against this and throngs of Trump supporters plan to gather in Washington DC to protest.

“If the Democrats manage to win both races (leading to a delayed Blue Wave), it would improve the odds of additional fiscal spending, providing another jolt to USD rates,” DBS strategists Philip Wee and Eugene Leow said.

“Broadly speaking, we think that a lot of good news has already been reflected in the markets. A moderation in optimism as the real economy catches up in the next few months could keep a lid on US yields in the short term.”

US Treasuries were weaker with the 10-year yield up 2 basis points at 0.93% and the dollar was off 0.3% trading at 89.63 against a basket of currencies. Gold was up 0.3% at $1,950 per ounce.

Yuan fix raised

The yuan surged 0.6% before retracing some gains as the dollar made a comeback. Earlier in the day the People's Bank of China (PBOC) lifted the onshore yuan's fixing to 6.476 per dollar, the biggest one-day lift in the yuan midpoint since China abandoned a decade-old peg against the dollar in 2005, and the strongest official guidance in more than 30 months.

The yuan’s gains follow its 7% rise against the dollar last year and more advances are in store.

“The latest moves are a catch-up with the other dollar pairs which have weakened recently, but we expect this to continue and the yuan to strengthen,” Patrick Bennett, currency strategist at CIBC told Asia Times Financial. 

“This will accurately reflect an economy which is outperforming and offers yield, growth and asset appreciation. We see the yuan appreciating to low 6s in the current year which means an 8-10% appreciation. Long term it could go sub-6 and trade with the 5-handle.”

Also on Asia Times Financial

China 'to gain bargaining power' over US via EU investment deal

China to remain bright spot in mostly downward global oil market

NYSE drops plan to delist Chinese telcos

China vows to protect food security amid shocks to supplies

 How the SPAC bubble can help establish pricing norms

Asia Stocks

· Japan’s Nikkei 225 index dipped 0.37%

· Australia’s S&P ASX 200 edged down 0.03% 

· Hong Kong’s Hang Seng index added 0.64%

· China’s CSI300 leapt 1.91%

· The MSCI Asia Pacific index advanced 0.28%.

Stock of the day

China Mobile shares rose as much as 7.2%, China Telecom gained 7.7% and China Unicom rose as high as 9.2%, after NYSE dropped plans to delist the three Chinese telcos

Asian markets US politics Georgia Senate vote China telcos Biden win Trump