Market Close Aug 11

Gold rally pauses as stocks on a tear

Gold takes a breather but more gains ahead; Macau casino stocks on a roll; Mainland China underperforms on political unease

Gold rally pauses as stocks on a tear
This handout picture taken on August 6, 2020 and provided by the Russian Direct Investment Fund shows a vaccine against the coronavirus disease, developed by the Gamaleya Research Institute of Epidemiology and Microbiology. Pic via AFP.

(ATF) Hong Kong: Financial markets jumped on Tuesday as US President Donald Trump's plan to cut capital gains tax emboldened risk takers at a time when investors are upbeat about a fresh round of US stimulus.

Safe havens were sold, with gold prices falling below the $2,000 mark to trade at $1,994 per ounce. The US dollar was marginally weaker against a basket of currencies hovering just above the 93 mark. 

Against a backdrop of record high global debt, we believe we are moving through a major epoch-change in global macro policy towards a much greater acceptance of inflationary outcomes. The result is likely to be more deeply negative real interest rates and greater risk of broad currency debasement,” Metals Fund Manager James Luke and Commodities head Mark Lacey at Schroders said.

“In this environment, continued increases in gold allocations could have extraordinary impacts on aggregate private gold holdings. We don't see why gold prices should be somehow capped at current levels at all in such an environment.”.

Nikkei and Hang Seng up

Japan’s Nikkei 225 index leapt 1.81% after trading resumed following the long holiday weekend, Australia’s S&P ASX 200 rose 0.47% propped by banks, miners, and property stocks and Hong Kong’s Hang Seng index was the regional outperformer. It surged 2.11% after being lifted by tech giant Tencent and casino stocks on news that Macau will gradually start re-issuing individual-visitor visas.

“The Macau government announced [that] Zhuhai will be the first Chinese city to be issued with Macau tourist visas from 12 August. We believe this is the first significant step to gross gaming revenue recovery, as we expect other Chinese cities to follow in phases, similar to recent Guangdong phased quarantine relaxation,” Jefferies analysts said in a note.

They said their base case was for a phased and gradual reopening with China issuing tourist visas on a province-by-province basis and potentially by cities within provinces.

But mainland Chinese stocks lagged with the CSI300 retreating 0.91%, with investors mindful of rising tensions between the US and China, including the ban of two prominent Chinese apps in the US and the threat of economic sanctions on several Chinese and US officials.

US Treasury Secretary Steven Mnuchin said companies from China and other countries that do not comply with accounting standards will be delisted from US stock exchanges as of the end of 2021.

This sets a jittery tone ahead of the Sino-US video conference on August 15 to talk about bilateral issues and the phase-1 trade deal signed in January. Trump has taken an aggressive position and markets are bracing for a Beijing reaction.

“We view China differently than we did eight months ago,” said Trump at a briefing. “I do not know if we want to have a deal with China.”

Investors remain positive the US will push through a stimulus package as Trump’s executive actions are not sufficient stimulus in the absence of an act of Congress.

“Passage of a new stimulus bill will buttress the households, businesses, and the stock market. By issuing executive orders, Trump has shown he has no patience for Congress’s dithering. This will resonate with voters, but only so far. A full stimulus bill needs to be signed and disbursed to sustain his rebound in popular opinion,” BCA Research analysts said in a note.

Credit markets are seeing a busy new issue pipeline with Hangzhou Qiantang’s unrated bond, MTR Corporation’s green bond and Redco Group’s 364-day note in the market. 

Malaysia’s Axiata Group has hired banks for a sukuk and a conventional 30-year dollar bond.

Also on Asia Times Financial

India guns for self-reliance in defence manufacturing 

Chinese electric car maker bucks trade war trend by applying for US listing

Special bonds likely peak in August-Sept

Foreign Exchange: Gold rush at an end? No, but yuan best bet

Asia Stocks

# Japan’s Nikkei 225 index leapt 1.88%

# Australia’s S&P ASX 200 added 0.47% 

# Hong Kong’s Hang Seng index 2.11%

# China’s CSI300 retreated 0.91%

# The MSCI Asia Pacific index advanced 1.81%.

Stocks of the day

Macau casino stocks Galaxy Entertainment (5.7%), Sands China (10%) and Wynn Macau (8.1%) all surged after the Macau government announced Zhuhai will be the first Chinese city to be issued with Macau tourist visas from 12 August.