Market Close Jan 18

GDP surprise stokes China markets

China outperforms as economy shines; Gold rise seen capped by strong dollar; Covid restrictions roil Japanese and Australian markets

GDP surprise stokes China markets
People wearing face masks following the coronavirus outbreak walk along Nanluoguxiang alley in Beijing on January 16, 2021. Photo: Tingshu Wang/ Reuters.

(ATF) Hong Kong: Japanese and Australian markets were crimped by coronavirus concerns as investors braced for more economic restrictions but Chinese markets outperformed after the economy’s surprise fourth-quarter expansion.

Australian Department of Health Secretary Brendan Murphy said the country is unlikely to fully open its borders this year even if most of its population gets vaccinated, while Japan’s Prime Minister Yoshihide Suga pledged to bring the pandemic under control even as hospitalisation cases hit a record high.

Japan’s Nikkei 225 index slumped 0.97%, Australia’s S&P ASX 200 retreated 0.78% but Hong Kong’s Hang Seng index advanced 1.01% and China’s CSI300 added 1.11% after the world’s second largest economy reported back to trend, supported by external and domestic demand recovery.

Regionally, the MSCI Asia Pacific index slid 0.57%. 

China’s real GDP rose by 6.5% year-over-year in the quarter, with analysts expecting the momentum to continue.

“Looking forward, domestic economic activities are likely to improve in 2021, and further supports from the global recovery are expected,” JP Morgan Asset Management Global Market Strategist Chaoping Zhu said, adding that the first quarter of the year will see strong growth readings as escalating pandemic control measures start to take effect. 

“Due to the recent resurgence of new Covid-19 cases in several locations, governments at various levels are set to call on people to reduce mobility and gatherings during the Chinese New Year. As a result, the seasonality in Chinese export and industrial production during Chinese New Year might be broken, and unusually high growth rates in this quarter are likely to be seen.”

Gold rose 0.4% to $1,835 per ounce after a respite from the strengthening US dollar which was flat versus a basket of currencies at 90.80. But analysts are cautious.

“Gold continues to lose traction on the back of the stronger US dollar as both shrugs off a dip in yields and remain non-reactive to US Fed Chair Powell’s dovish forward guidance or even the political discord on both sides of the pond,” Stephen Innes, Chief Global Market Strategist at Axi, said.

“Barring the Fed easing into the recovery, it's now unlikely gold will exceed 2020 highs. And with growth returning to trend as vaccines get rolled out, policy expectation will increase, and gold could now close out the year between $1,650 and $1,750 assuming herd immunity is attainable.”

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Asia Stocks

· Japan’s Nikkei 225 index slumped 0.97%

· Australia’s S&P ASX 200 retreated 0.78% 

· Hong Kong’s Hang Seng index advanced 1.01%

· China’s CSI300 added 1.11%

· The MSCI Asia Pacific index slid 0.57%.

Stock of the day

Evergrande Property Services shares soared by as much as 30.1% after reports in the Chinese media that the company aims to increase its area under management by 360 million sqm – more than double the existing number. Chinese property developers are leaning on property management to diversify their incomes. Standalone spin-offs of their property management businesses fuelled a mini-boom in IPOs in Hong Kong last year.

Asian markets China outperforms China Q4 data Dollar steady Gold up Japan flat Australia Covid hit