Markets Jun 19

Investor focus shifts to economic recovery, virus containment

Asian markets were broadly higher amid growing hopes the coronavirus pandemic is being brought under control

Investor focus shifts to economic recovery, virus containment
Medical workers carry a man said to be the last patient heading home after recovering from the coronavirus in Wuhan pulmonary hospital in China's central Hubei province on June 17, 2020. Photo: AFP   

(ATF) Asian markets were broadly higher amid growing hopes the coronavirus pandemic is being brought under control, with economic optimism also driving investor sentiment.

In the week ahead, Purchasing Managers' Index (PMI) updates in US, Europe, Japan and Australia will be assessed to gauge the impact of lockdown restrictions being eased earlier this month.

“The PMI surveys provided an early indication that the worst of the economic impact from the virus outbreak appears to have hit in April, with the global PMI staging a record rise in May, albeit remaining worryingly weak by historical standards,” Chris Williamson, chief business economist at IHS Markit, said.

“With lockdowns having increasingly eased into June, further gains in the PMIs will be needed to corroborate growing expectations that economic recoveries are gaining traction.”

On Friday, Japan’s Nikkei 225 index was marginally higher adding 0.14%, Australia’s S&P ASX 200 index was up 0.91% and Hong Kong’s HSI benchmark was flat. China’s CSI300 index was up 0.82% after a report on the virus containment in the capital.

“The epidemic in Beijing has been brought under control,” said Wu Zunyou, the chief epidemiologist at China’s Center for Diseases Prevention and Control, according to a Reuters report.

Amid a growing conviction that authorities are able to control the pandemic, green shoots are beginning to emerge and be noticed.

Further growth

“Over the last two weeks, there has been a more broad-based improvement in growth trends around the world. More economies have now joined in the recovery and more indicators within each economy are also improving. High frequency indicators suggest that we are seeing a further acceleration in growth in June as compared to May,” Morgan Stanley analysts said in a note.

Overnight, Wall Street had a lacklustre finish with the Nasdaq Composite advancing 0.33%, the S&P 500 edging up 0.06%, while the Dow Jones Industrial Average retreated 0.15%.

Credit markets in Asia are slightly off with the Asia IG index wider by one basis point 85/86 and sovereign CDS wider by 1-2 bps as investors digest new issues and monitor the progress of a strong pipeline.

Sino-Ocean Holdings has hired banks for a potential Reg S dollar bond as a growing number of Chinese issuers hit the market. “Chinese and Philippine issuers kept up the momentum in the Asian dollar-bond primary market despite a weaker market sentiment,” CreditSights said in a note.

“Demand continues to be strong, as a number of transactions priced through fair value and the initial price guidance to final price guidance.”