Market Close May 15

China rebound boosts markets but US friction a worry

China data shows signs of recovery; Oil jumps on hopes of demand improvement; US-China tensions eyed

China rebound boosts but US friction a worry
A nurse tends to a crying newborn baby wearing a face shield, as a preventive measure against the spread of the Covid-19 coronavirus, at the National Maternity Hospital in Hanoi on May 6, 2020. Photo: Nhac Nguyen / AFP

Hong Kong: Asian markets were watchful on Friday after data from the world's second largest economy showed early signs of recovery despite US-China tensions continuing to simmer and dampen sentiment. 

China industrial production rose 3.9% in April on-year, beating the expectation of a 1.5% rise, although retail sales contracted 7.5%, higher than the estimated fall of 6%. 

“China’s macroeconomic data for April has been showing early signs of a V-shaped recovery following the Covid-19 crisis,” said Nupur Gupta, Portfolio Manager, Investment Solutions at Eastspring Investments.

“China’s recovery so far acts as a good template for the rest of the world and is likely giving markets a reason to believe that a V-shaped recovery is underway.”

Japan’s Nikkei 225 reversed its early losses to finish up 0.62% and Australia’s S&P ASX 200 rose 1.43%, and the MSCI Asia Pacific index climbed 0.63%. But the Hang Seng benchmark eased 0.14% and China’s CSI 300 share index is 0.32% dropped after the sticker shock from the retail sales data.

Slow to recover

“Consumption has been understandably slow to recover after China reopened in April. While today’s numbers show continued contraction in Chinese retail sales, we have seen a sequential improvement in consumption since March, reflecting more normalised economic activity despite holiday outings remaining muted in April,” Binay Chandgothia, managing director at Principal Global Investors, said.

He expects China’s GDP to expand in the second half of the year, assuming a global containment of the virus. However, he warned the US-China relationship, had the potential to significantly impact the speed of the market recovery.

Reflecting the expectation of improved demand, oil prices rose with the WTI rose 2.8%.

Still investors are eyeing the US-China war of words after US President Donald Trump slammed China over its handling of the coronavirus outbreak, saying he has no interest in speaking to President Xi Jinping at the moment. "We could cut off the whole relationship. You’d save $500 billion if you cut off the whole relationship," he said.

Credit markets also showed improvements from the morning levels with the Asia IG index contracting 2 basis points to 117/118, while sovereign CDS moved in by 1-3 basis points.

Chinese developer Zhenro Properties priced a $200-million bond offering at a lower yield than initially indicated after receiving over $1.4 billion in orders. This shows the market is receptive to supply from Chinese property developers, one of the biggest source of hard currency bonds from Asia.

ATF China Bond 50 Index:

Also on Asia Times Financial

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China sees shock industrial growth but consumers wary

Foreign Exchange: Xi call for strengthened virus controls weighs on yuan

Asia Stocks

· Japan’s Nikkei 225 rose 0.62%

· Australia’s S&P ASX 200 jumped 1.43% 

· Hong Kong’s Hang Seng index eased 0.14%

· China’s CSI300 fell 0.32%

· The MSCI Asia Pacific index advanced 0.63%.

Stock of the day 

AAC Technologies rose as much as 9.85 after it said it said 5G’s rapid development would provide a new boost to its market. The company projected a ramp-up of its optics business by 60% by the end of the third quarter.