Market Close Jun 17

Economic data, medical breakthrough boosts markets

US data, virus treatment breakthrough lifts sentiment; Powell testimony continues; Low rates unleashes waves of corporate bond issuance

Economic data, medical breakthrough boosts markets
An airport worker wearing protective clothing is seated by a monitor next to a temperature detector at the Beijing International Airport on June 17, 2020. Beijing's airports cancelled more than 1,200 flights and schools in the Chinese capital were closed again on June 17 as authorities rushed to contain a new coronavirus outbreak linked to a wholesale food market. STR / AFP

(ATF) Hong Kong: Financial markets advanced as worries about a second wave of coronavirus infections abated and positive economic data helped investor sentiment.

The world’s largest economy posted strong retail sales, and China moved quickly to counter any second wave of infections.

Meanwhile, a "breakthrough" steroid treatment for the coronavirus was hailed by the World Health Organisation, igniting hopes that pandemic deaths can be reduced. 

“The market has also been increasingly shrugging off the still-rising global cases of coronavirus. It appears as though investors are hopeful that as medical professionals get closer to finding effective treatments and a vaccine for covid-9 patients, that the pandemic might soon be declared over,” said Fawad Razaqzada, Market Analyst at TF Global Markets.

And while Razaqzada warned of the risk from a second wave and an uptick in infections as economies open up he said “investors aren’t thinking too far ahead, and have evidently been buying every dip knowing full well that the Fed will step in every time there is a stock market sell-off.”

And although Japan reported May exports fell 28.3%YoY, missing expectations and below the 21.9% YoY decline in April, analysts see this as the bottom. 

“Looking ahead, we suspect that May was the nadir for external trade as many of Japan’s trading partners started to emerge from lockdowns,” said Marcel Thieliant, Senior Japan Economist at Capital Economics while adding that the export climate index, a weighted average of the PMIs of Japan’s biggest trading partners, bounced back strongly and Korean trade data for the first 10 days of June showed an improvement. Thieliant forecasts a 7% q/q rebound in export volumes and a 2% rebound in import volumes in Q3.

As a result, Japan’s Nikkei 225 underperformed the region with the index slipping 0.56%. Australia’s S&P ASX 200 index rose 0.83%, Hong Kong’s HSI benchmark climbed 0.56% and China’s CSI300 index edged up 0.1%.

Markets await Federal Reserve Chairman Jerome Powell’s second day of testimony to Congress on Wednesday after his comments on the first day acknowledged the economic rebound while observing output and employment numbers were far below the pre-pandemic levels.  

Credit markets were firm with although off the morning highs with the Asia IG index moving in by 1 basis point at 83/84 and sovereign CDS shrinking by 1-3 bps. Primary market bond mandates continue to swarm with Chinese issuers continuing their march to the market. China National Bluestar, Zhongliang Holdings and China Construction Bank have issued final price guidance for deals likely to price today. They will join Yincheng International, China Oilfield Services and Taiyuan Longcheng Development which are also in various stages of bond issuance. 

Also on Asia Times Financial

Asia Stocks

  • Japan’s Nikkei 225 slips 0.56%
  • Australia’s S&P ASX 200 rises 0.83% 
  • Hong Kong’s Hang Seng index climbs 0.56%
  • China’s CSI300 edges up 0.1%
  • The MSCI Asia Pacific index 0.1%.

Stock of the day 

Steelmaker Tiangong International rose as much as 12% after it issued a rare positive profit alert. It said the Group is expected to have a significant increase of over 30% in its unaudited consolidated net profit for the six months ending 30 June 2020 as compared to the same period of 2019. It attributed the surge to increased domestic sales and OEM offtake as a result of a drop in imports of die steel.