Market Close Jul 06

China leads regional risk rally

Risk rally triggered by Chinese editorial; US Treasuries slide as safe havens dumped; Investors eye more signs of economic recovery

China leads regional risk rally
A parent of a student takes photos of test center layouts a day before the National College Entrance Examination (NCEE), known as Gaokao, at a school in Beijing on July 6, 2020. Parents and students often visit test centers a day before the exam to familiarise themselves with the location and layout. GREG BAKER / AFP

(ATF) Hong Kong: China led risk markets higher after a state-backed journal published an editorial heralding the dawn of a bull market underpinned by a post-pandemic digital economy.

China Securities Journal said in a front page editorial “We firmly believe that China’s economy will continue to improve for the long term, and will not be stranded by the wind and waves; we look forward to the wealth effect of the capital market, which will bloom for a long time and will not be short-lived; we practice, awe the market, awe the risks, step up and move forward.”

The CSI300 benchmark surged 5.7%, the Hang Seng index, Hong Kong’s equity benchmark jumped 4% and Japan’s Nikkei 225 jumped 1.83% but Australia’s S&P/ASX 200 fell 0.71% amid fears of a resurgence in coronavirus infections following new cases in Victoria which forced the NSW-Victoria border to close.

The rally triggered a sell off in safe haven assets with 10-year US Treasuries rising 3 basis points to 0.69%.

Expectations of more central bank cuts are also driving markets as several regional authorities are seen resuming policy easing after the recent pause.

“The PBoC gently tucked the reins these past couple of months, sucking liquidity back out of the system and holding off on major rate cuts - Still more easing is likely, both in terms of the policy rate and RRRs, once the effect of the first fiscal push wears off,” said Frederic Neumann HSBC’s Co-Head of Asian Economics Research.

“In India, with fiscal policy more constrained than elsewhere, pressure on the RBI to lend support will only grow, with another 50bp in cuts in the pipeline,” he said while adding Indonesia, Sri Lanka, Taiwan, and Thailand look all set to reduce policy rates further in the coming months.

Later in the week, investors are awaiting more confirmation of economic recovery and that economies are firmly on the road to recovery as investors track global PMI and US non-manufacturing data, eurozone industrial output and retail sales in the week ahead.

“The good news is that the incoming data continue to suggest a recovery that is about as v-shaped as we could reasonably have hoped for. Retail sales in the US have now recouped two-thirds of their fall. In Germany, sales are already back to their pre-virus level,” said Neil Shearing, Group Chief Economist at Capital Economics.

Also on Asia Times Financial

Chinese high-flier Wu Guangsheng hit by debt, bond crisis

MacBook order a boost for TSMC

ATF indices enter critical period for policy

Global defaults in 2020 could exceed 2009 record: Fitch

Huawei not totally banned in France

Asia Stocks

  • Japan’s Nikkei 225 climbed 1.83%
  • Australia’s S&P ASX 200 eased 0.71% 
  • Hong Kong’s Hang Seng index jumped 4%
  • China’s CSI300 soared 5.7%
  • The MSCI Asia Pacific index advanced 1.21%.

Stock of the day 

Semiconductor Manufacturing International Corporation (SMIC) surged 21% after the company said it will initially issue 1,685,620,000 RMB Shares at the offer price of RMB27.46 per RMB Share, to be listed on the Sci-Tech Board.