Market Close Aug 26

Investors pause ahead of Jackson Hole meet

Alibaba rallied on Ant Group IPO valuation speculation; Stocks mostly flat as investors await Fed; Thin case for structural dollar depreciation, BofA says

Investors pause ahead of Jackson Hole Fed meet
An employee stands next to the logo of Ant Financial Services Group, Alibaba's financial affiliate, at its headquarters in Hangzhou, Zhejiang province in January 2018. File photo by Shu Zhang/ Reuters.

(ATF) Hong Kong: Asian markets paused ahead of the Fed’s Jackson Hole Economic Policy Symposium, which kicks off on Thursday, as investors hold off taking any directional bets.

As investors await any hints over the direction of monetary policy, there are expectations the US central bank will reiterate continued support for the world’s biggest economy and pledge to do whatever it takes to see the US through the coronavirus crisis.

Still, there is room for disappointment, which explains why markets have been so muted on Wednesday.

“Some investors might be disappointed if they expect an explicit make-up policy or the immediate deployment of yield caps and targets, though we suspect only a minority of investors hold those expectations,” Goldman Sachs economists said in a report.

Most markets across the region ended flat with China’s CSI300 underperforming and suffering a fall of 1.13%.

“There may not be much room for nominal rates to move given the zero bound, but the Fed’s goal is for the new framework to firm inflation expectations,” said Steven Englander, Standard Chartered Bank’s head of Global G10 FX Research. “The USD, gold and equities have all become real rates trades to some degree.”

Gold down, dollar better

Gold prices fell 0.5% to $1,918 per ounce and the US 10-year Treasury yields rose two basis points to 0.70%. The US dollar strengthened marginally to 93.14 against a basket of currencies.

Still there are expectations the US dollar may have bottomed out.

“We disagree with the USD debasement thesis and find no evidence that this is in progress, despite recent USD weakness,” BofA Securities analysts said in a note.

“Unrivalled US Treasury market depth and lack of suitable substitutes remain legacy reasons why the USD is likely to remain the global reserve currency for some time to come, despite discrete regional spheres in which alternatives have risen in use. We believe ongoing diversification of reserves held by official sector institutions is justifiable but not evidence of debasement,” they said in a note.

Asian credit markets were also tepid with the Asia IG index widening a basis point to 62/63 bps. But deals from Hysan Development, Tencent Music, Korea Expressway and Zhongan Online are keeping primary markets busy.

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Chinese interference grows in the election, real and imagined

'Don't waste food' edict spurs fear of China food crisis  

Billions in crypto flowing out of China 

Ant Group delivers timely boost to Hong Kong market

China media blitz to push free-trade zone on Hainan Island 

Asia Stocks

# Japan’s Nikkei 225 index edged down 0.02%

# Australia’s S&P ASX 200 retreated 0.73% 

# Hong Kong’s Hang Seng index inched up 0.02%

# China’s CSI300 slid 1.13%

# The MSCI Asia Pacific index added 0.14%.

Stock of the day

E-commerce giant Alibaba Group shares rose as much as 4.2% in a flat market, on the report that its affiliate Ant Group is aiming to go public as soon as this fall, and is targeting a market valuation above $200 billion.