Market Close May 05

Market sentiment revived by economic reopenings

Hong Kong boosted by relaxation hopes; Australia lifted by less gloomy forecast; Strong investor response for new bond issues

Market sentiment revived by economic reopenings
A security guard in protective clothing stands near restaurants in Hong Kong earlier this year. City officials have decided to allow bars and restaurants to reopen after Covid-19 infections fell to low levels in recent weeks. Photo: AFP

Hong Kong: Investor sentiment was lifted by easing restrictions and some revival of economic activity in countries across the world despite horrific data and forecasts that capped the market upside. 

Officials in Hong Kong pledged to ease restrictions for restaurants, bars and gyms, which prompted expectations of an economic rebound after the city reported its GDP dropped by 8.9% in the first quarter of 2020 from a year ago, and retail sales fell 37% in the first quarter.

The Hong Kong benchmark, the Hang Seng index, rose 1.08% and Australia’s S&P/ASX 200 added 1.64% riding the extended rally in oil prices with Brent rising 4%.

Japan and China were shut for holidays on Tuesday.

Europe opened on a firm note with the Stoxx Europe 600 adding 1.42%. S&P Futures are up 0.79%, Dow Jones Futures are 0.85% higher and Nasdaq futures have climbed 0.88%. 

Credit markets were also firm with investors giving a solid response to new bond offerings – CK Hutchison and Bank Mandiri both getting healthy orders. The Asia IG series 33 index narrowed by 4 basis points (bps) to 119/121 bps and China moved in 3 bps to 50/52, while Australia was 5 bps tighter at 119/122 after the central bank’s less pessimistic assessment.

The Reserve Bank of Australia’s decision to hold rates at the record low level of 0.25% was widely expected but markets got a boost from a less gloomy than expected economic forecast.

“It expects GDP to fall by around 10% in the first half of the year, a touch less than our forecast of 12.5%. Across the year, the Bank expects GDP to fall by 6%, whereas we think it will plunge by 7%,” Marcel Thieliant, Senior Australia & New Zealand Economist at Capital Economics, said.

Hong Kong to reopen bars, restaurants and schools

Hong Kong’s decision to allow bars, restaurants, gyms and schools to reopen came after the city reported no new infections from the coronavirus in 10 out of the past 16 days. It also came a day after Hong Kong reported its worst GDP data in years. Still analysts were cautious about forecasting a major turnaround.

“We forecast HK’s GDP growth to shrink by 12.2% year-on-year and 10.5% year-on-year in the second quarter and the first half of 2020. But we expect the downward pressure of the economy should taper down on the easing pressure of the pandemic in the second half of 2020, with which HK’s GDP growth will drop by 4.3% in 2020,” Banny Lam, Head of Research at CEB International, said.

  

Also on Asia Times Financial

Asia firms turn to making medical gear

US warns of 'consequences' if China abandons trade deal  

Australia losing $2.5 bn a week in virus shutdown

 

Foreign Exchange:.

Asia Stocks

· Australia’s S&P ASX 200 advanced 1.64% 

· Hong Kong’s Hang Seng index climbed 1.08%

· The MSCI Asia Pacific index added 0.51%.

Stock of the day 

Quick service restaurant chain Cafe de Coral Holding rose as much as 6.9% after the Hong Kong government said it will relax virus restrictions soon.