Market Close Mar 29

Margin selling offsets economic optimism 

Nomura, Credit Suisse hit by hedge fund trading losses; oil slips after Suez unblocked; US dollar, Treasuries firm

Margin selling offsets economic optimism 
New York Stock Exchange. Photo: Reuters

(ATF) Hong Kong: Asian investors were cautiously optimistic on economies re-opening from pandemic lockdowns but were watchful as the full impact of the margin-related selling in US markets unravelled.

Technology heavyweights in China came under pressure on Monday after forced selling by a family investment office in US trading on Friday. The selling had wiped out $35 billion in value off a range of bellwether stocks, including those of US-listed Chinese companies.

Oil prices slipped after a report that the stranded container ship Ever Given has almost been completely floated clearing the Suez Canal and opening up the vital global trade passage. West Texas Intermediate crude eased 0.3% to $60.80 a barrel. Brent fell 0.9% to $63.99 per barrel.

Japan’s Nikkei 225 index jumped 0.71%, China’s CSI300 inched up 0.18% but Hong Kong’s Hang Seng index ended flat after the tech sector underperformed. Australia’s S&P ASX 200 dipped 0.36% after a COVID-19 outbreak was discovered in Brisbane. Regionally, the MSCI Asia Pacific index added 0.43%.

China profit

China’s shares were also lifted by weekend data that showed annual profits at China’s industrial firms surged in the first two months of 2021. 

“We expect Beijing to stick to its 'no sharp policy shift' commitment,” said Nomura analysts Jing Wang, Lisheng Wang and Ting Lu after industrial profit growth surged to 178.9% y-o-y in January-February from 20.1% in December.

The spike was driven by a large base effect, a jump in industrial production thanks to earlier-than-usual resumption of business following the lunar new year holidays, and higher PPI inflation, they said.

“The surge in profit growth in January-February from the 2020 annual growth rate was broadly based across different ownership types,” they said.

Safety bid

Havens caught the safety bid with US 10 year yields dropping 2 basis points to 1.66% and US dollar firming 0.1% against a basket of currencies to 92.9.

Friday’s sell off in the US not only hurt the Asia listings of the Chinese companies but also relative value trades.

The sell-off in GSX Techedu Inc. that tumbled 42%, in the US, triggered sharp selling in educational services stocks in Hong Kong with names like New Oriental Education and Scholar Education falling by 12-13%.

Nomura and Credit Suisse shares have been hit by the hedge fund firesale.

Although Nomura did not disclose the name of the client, its shares fell around 16% Monday after the firm said it is exposed to a huge loss from transactions with an undisclosed U.S. client against which Nomura has claims of about $2 billion based on market prices as of March 26.

“Given that this is a net rather than a gross exposure, we believe it almost certainly means Nomura will recognize a bottom-line loss in its fiscal fourth quarter ending March 31,” said Michael Makdad, Morningstar’s senior equity analyst.

“The volatility of Nomura’s earnings due to its larger presence in trading businesses overseas is the reason we have favored Daiwa Securities as an investment over Nomura since we began coverage of the two stocks in 2018.”

Also on Asia Times Financial

Asia Stocks

  • Japan’s Nikkei 225 index jumped 0.71%
  • Australia’s S&P ASX 200 dipped 0.36% 
  • Hong Kong’s Hang Seng index ended flat
  • China’s CSI300 inched up 0.18%
  • The MSCI Asia Pacific index added 0.43%

Stock of the day

Yanzhou Coal Mining shares rose as much as 19% after it declared a special dividend of 42 cents despite a fall in net profit, giving a yield of 12%. The company has also proposed changes to its articles of association in order to diversify its operations.