Market Close Apr 23

Investors look past glum EU data 

Oil rebound stabilises sentiment; European data disappoints; Investor focus on EC, US relief measures  

by Umesh Desai
Investors look past glum EU data 
People wearing masks walk past a stock market display board in Hong Kong in March 2020. Photo: Anadolu via AFP

Hong Kong: Investor sentiment has calmed after oil prices extended gains but gloomy European economic data and details from a European Council economic response to the coronavirus pandemic gave markets reason to pause.

“There have been spectacular misses on European, French and German April PMIs this morning which led several European indexes to turn negative and pushed the Euro lower,” Olivier Konzeoue, FX Sales Trader at Saxo Markets, said.

IHS Markit’s Flash Composite Purchasing Managers’ Index (PMI) for Eurozone fell to 13.5 from 29.7 in March, the lowest since July 1998. This was preceded by German PMI – 17.1 in April (35.0 in March) and French PMI – 11.2 in April (28.9 in March), both well below market expectations.

The Stoxx Europe 600 edged up 0.3% and S&P futures were up 0.2% after the MSCI Asia Pacific index rose 1.1% on the back of an oil-fuelled recovery. The WTI June contract added 13.7% and Brent futures added 5%.

“The rather muted reaction relative to the amplitude of the misses proves the lack of surprise for markets, which are almost immune to data at the moment. The focus is instead going to be on the various exit strategies as well as the stimulus initiatives put in place by governments and central banks to counter the negative effect of coronavirus. Risk sentiment will be driven by the Eurogroup video-conference meeting today where EU leaders will try and agree on a fiscal lifeline for the Eurozone economy,” Saxo Market’s Konzeoue said.

Later on Thursday, the United States is expected to pass a $484-billion coronavirus relief bill, bringing the total of funds approved for the crisis to nearly $3 trillion.

Earlier, Japan’s Nikkei 225 index added 1.52%, while the Hong Kong benchmark, the Hang Seng index, advanced 0.35% and the Australian S&P ASX 200 ended flat.

But China’s CSI 300 benchmark eased 0.25% after US regulators repeated a warning to investors about investing in Chinese companies listed in the US.

US Securities and Exchange Commission chairman Jay Clayton, in a Fox TV interview, warned investors about companies’ governance issues with regard to disclosures. He said the SEC had struggled for a long time with the Public Company Accounting Oversight Board (PCAOB) to get access to audit work papers and the board did not have the same oversight over operations in China from a financial reporting point of view.

This followed a report from the SEC that said “Investors and financial professionals should consider the potential risks related to the PCAOB’s lack of access to inspect PCAOB-registered accounting firms in China.“

Meanwhile, South Korea’s benchmark Kospi rose 0.98% even though the country reported its biggest fall in GDP since 2008, as analysts factored in improvements ahead.

South Korea reported that its GDP shrank 1.4% in the first quarter from the previous quarter, reversing the gains from last year’s fourth quarter. ING economists said the South Korean economy was faring better than most of Asia and they could upgrade their -0.3% GDP forecast for 2020 amid chatter of a third additional budget and a stronger second quarter.

“We anticipate a further, though smaller, decline in GDP in 2Q20 – Korea was in control of its Covid-19 outbreak much earlier than anywhere else apart from China, so most of the weakness in 2Q20 will relate to the global backdrop rather than domestic weakness,” Robert Carnell, ING’s regional head of research, said in a note.  

The global infections count now exceeds 2.6 million cases with a total of over 185,000 deaths.

Credit markets are beginning to see the primary issuance pipeline swell with several investment grade issuers in the market – Kookmin Bank and Korea East West Power are in the market with bond offering plans.

The Asian IG series 33 index has narrowed by 3 bps to 120/123 bps with Malaysia the out-performer, narrowing 7bps to 110/120 bps.

ATF China Bond 50 Index: The financial index showed the highest increase today: 0.12%

 

Also on Asia Times Financial:

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Chinese steel output set for 'remarkable' rebound

Getting China's millions back to work


Foreign Exchange: Everything's up or down as bears and bulls battle to standstill 

Asia Stocks

· Japan’s Nikkei 225 climbed 1.52%

· South Korea’s Kospi rose 0.98%

· Australia’s S&P ASX 200 dipped 0.08% 

· Hong Kong’s Hang Seng index rose 0.35%

· China’s CSI300 eased 0.35%

· The MSCI Asia Pacific index advanced 1.1%.

Stock of the day 

China Education Group rose as much as 11.3% after the private university operator reported a 23% rise in enrolments driven by increased affiliations. That drove revenue up by 41% and net profit by 57%. The company is exploring more acquisition opportunities with attractive growth potential and expects more schools to join the Group in the future, as it has reviewed 380 potential M&A targets.