Market Close Oct 15

Hong Kong stocks battered by US sanctions

Rate cut signal boosts Australian stocks; Hong Kong weighed down by US sanctions; Improving chances of Biden victory sparks overweight calls on EM local-currency fixed income

Hong Kong stocks battered by US sanctions
A trader checks share prices in London in this file photo. European shares hit two-week lows on Thursday, knocked down by tougher curbs in London and Paris to fight a second wave of the COVID-19 pandemic, with no breakthrough in Brexit trade talks also a dampener. Reuters photo.

(ATF) Hong Kong: Asian markets retreated further after various governments announced fresh restrictions to curb another wave of the coronavirus as the global tally exceeded 38.5 million with 1.1 million deaths world-wide.   

Meanwhile, Hong Kong stocks underperformed after the US State Department named 10 individuals, including Hong Kong Chief Executive Carrie Lam, on whom asset-blocking sanctions will be imposed. 

E-commerce giant Alibaba weighed on the market after a Reuters report the US government is considering a proposal to add China's Ant Group to a trade blacklist.

“We regard three sectors of the Chinese credit market as key targets for US sanctions: technology companies, banks and state-owned enterprises (SOEs). China relies on the US for most of its tech imports,” AllianceBernstein analysts said in a note.

“Because US-China tensions may escalate in the run-up to the US elections on November 3, we think caution is warranted.” 

But Australian stocks outperformed after RBA Governor Philip Lowe signalled a November interest rate cut, which took the S&P ASX 200 index to a 7-month peak.

“As the economy opens up, though, it is reasonable to expect that further monetary easing would get more traction than was the case earlier,” the Australian central bank head said in a speech.

Australia’s ASX 200 added 0.5% and Hong Kong’s Hang Seng index tumbled 2.06% with technology shares declining the most. 

The dollar gained, rebounding from its recent weakness against a basket of currencies, rising 0.4% to 93.72. This weighed on gold which retreated 0.43% to $1,892 per ounce.

Fixed income products flourish

Fixed income products flourished amid Improving odds of a Joe Biden victory along with a Democrat sweep at the November Presidential and Congressional elections. The yield on 10-year Treasuries fell three basis points to 0.70%. The hunger for yields allowed China to halve the yield offered in its bonds which priced during the day.

Oxford Economics said in a note the prospects have given a solid boost to fixed income reflationary trades. 

“We have positioned for this through our allocation for Treasury curve-steepeners and overweight on EM local-currency fixed income. Steeper curves, in turn, are an important ingredient of the broader value-revival thesis in a broad range of structurally cheap asset classes such as equity value and EM FX,” the note said.

ATF China Bond 50 Index: Banks weigh on index gauges as China credit growth hits new high

Also on Asia Times Financial:

Digital China plans underway, $49 billion of new contracts signed 

China cuts rare earths exports by 43% in Sept, builds stockpile

China halves yields at global bonds sale

Massive beryllium find raises stakes in rare earth tensions

China's real estate black hole grows as govt mulls takeovers

China and private creditors must join debt relief scheme: IMF

Asia Stocks

· Japan’s Nikkei 225 index slid 0.51%

· Australia’s S&P ASX 200 added 0.50% 

· Hong Kong’s Hang Seng index tumbled 2.06%

· China’s CSI300 fell 0.17%

· The MSCI Asia Pacific index slipped 0.94%.

Stock of the day

E-commerce giant Alibaba fell as much as 4.5% after Reuters reported the US State Department has submitted a proposal for the Trump administration to add China's Ant Group to a trade blacklist.

Asian markets Hang Seng Australia Hong Kong Nikkei US sanctions Ant Fixed income Alibaba