Market Close Sep 30

Investors braced for a rocky ride as the US election nears

Volatility spike hints at contested election; China data boosts but rate cut expectations swirl; US-China tensions simmer

Investors braced for a rocky ride as the US election nears
Traders work at the Philippine Stock Exchange in Manila on September 30, 2020. Global funds have recommended cutting equity allocations to the lowest since 2010 and increasing bond holdings to their highest since then, according to a Reuters poll which found a correction in world stocks before year-end was likely. Photo: Reuters/Eloisa Lopez.

(ATF) Hong Kong: Investors braced for stormy sessions ahead as sparks flew at the US Presidential Debate on Tuesday night (early Wednesday in Asia) with both candidates indulging in name calling and US President Donald Trump refusing to commit to a peaceful transfer of power if he loses the election. Investors positioned themselves in the options market for a volatile period ahead of the elections.

“Investors have yet to shake off prospects of a contested outcome or a triple sweep by the Democrats, wary that October has been traditionally challenging for stock markets,” DBS Bank strategists said in a note.

China’s factory growth data surprised on the upside but investors were more concerned about the rising geopolitical tensions between the world's two biggest economies.

Activity in China’s factories extended solid growth in September as payrolls expanded for the first time this year and overseas demand surged.

But the employment index barely showed expansion and the continued job market pressure pointed to the need for policymakers to stay accommodative, analysts said.

“We expect the PBoC to continue to lower credit costs to help lift private investment through targeted RRR cuts (equivalent to a 25bp broad-based cut) as well as further lowering of the loan prime rate by 20bp this year,” said Erin Xin, HSBC’s Economist for Greater China. 

“Continued implementation of tax cuts and fee reductions as well as structural reforms to level the playing field should also help to incentivize further private sector investment and continue the recovery momentum.”

Geopolitical tensions remain elevated after US Republicans called for stricter limits on some China-related investments with the release of The China Task Force. China on its part is also preparing the ground to launch an antitrust probe into Google, a Reuters report said.

Australia’s S&P ASX 200 benchmark tumbled 2.29%, Japan’s Nikkei 225 benchmark slid 1.5% and China’s mainland CSI 300 dipped 0.1% but Hong Kong’s Hang Seng index climbed 0.79% propelled by technology giants. 

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Asia Stocks

· Japan’s Nikkei 225 index slid 1.5%

· Australia’s S&P ASX 200 tumbled 2.29% 

· Hong Kong’s Hang Seng index advanced 0.79%

· China’s CSI300 dipped 0.1%

· The MSCI Asia Pacific index retreated 1.71%.

Stock of the day

China’s e-commerce giant Alibaba rose as much as 4% after its CFO said the cloud unit would turn profitable in 2021 and that there was “huge valuation potential”.