Markets Sep 10

Markets rebound but tensions brewing

Optimism returned to Wall Street last night, but Sino-US strains continued to cloud the outlook for investors; meanwhile, stocks on the Jakarta exchange plunged today after news of a further lockdown to counter the coronavirus 

Markets rebound but tensions brewing
Indonesian Finance Minister Sri Mulyani Indrawati, seen here at the World Economic Forum in Hanoi in Sept 2018, said last week Bank Indonesia will buy $28 billion of state bonds with zero return this year. The move is part of a $40bn financing deal to fight the impact of the coronavirus. She also pledged that the central bank would stay independent. Pic: Reuters.

(ATF) Investors have tiptoed back into markets following the recent tech carnage, but gains are capped as geopolitical risk remains elevated and the return of social distancing measures in Jakarta have served as a reminder about the lingering capacity of the pandemic to flare again.

Still there is some optimism after a rebound on Wall Street indicated the recent market selloff continues to bear the mark of a correction. Overnight, the Dow Jones Industrial Average added 1.6%, the S&P 500 rose 2.01%, and the Nasdaq Composite leapt 2.71%.

“Much of the Nasdaq and S&P500 sell-off has been reversed overnight. Stock futures suggest more to come today. By close tomorrow, we may only be down slightly on the week,” said Robert Carnell, ING Bank’s Regional Head of Research for the Asia-Pacific.

“As far as the rest of the week is concerned, it's very hard to say, but I'd be wary of looking for another direction change for a while – though perhaps if buying fervour is still a bit limp, it may be more of a range-trade than before.”

In Asia, Japan’s benchmark the Nikkei 225 has advanced 0.54%, Australia’s S&P ASX 200 is up 0.48%, China’s CSI 300 benchmark climbed 1.01% and Hong Kong’s Hang Seng index edged up 0.16%.

Jakarta stocks down

The Jakarta stock index is down over 5% after Indonesia’s capital went back into lockdown as the coronavirus outbreak escalated. Indeed, one media report warned that the city was preparing for a collapse of the healthcare system.

Meanwhile, fresh tensions have emerged between the world’s two biggest economies after Washington revoked visas for more than 1,000 Chinese students and nationals deemed to be security risks.

“China has leveraged every aspect of its country including its economy, its military, and its diplomatic power, demonstrating a rejection of western liberal democracy and continually renewing its commitment to remake the world order in its own authoritarian image,” the acting secretary of the Department of Homeland Security Chad Wolf said.

But Asian credit markets have become active after South Korea priced a 10-year sovereign bond and Linyi City Construction priced a 3-year bond. The Asia IG index has shrunk by a basis point to 58/59. CATL’s 2-part bond dealGuangzhou Metro’s dual -tranche offeringXinyuan Real Estate’s puttable bondsTongyang Insurance’s ultra-long bond, and ENN Energy’s greenbonds are in the market. China National Chemical has hired banks for issuing bonds, which could be dollar- or euro-denominated.