Markets Aug 11

Markets soar on stimulus hopes

Hong Kong boosted by casino stocks as Macau visas resume; Trump casts doubt on China trade deal; US stimulus expected to lift households, stocks and businesses 

Markets soar on stimulus hopes
Casino owners in Macau are hoping to see scenes like this again, from pre-virus days. This photo shows visitors taking snaps in front of the Grand Lisboa resort in March 2019. The gambling enclave hit hard times in the first half of 2020 because of the coronavirus, but it's hoping to see individual visitors from Zhuhai later this week and group tours sometime soon. Photo: Anthony Wallace / AFP.

Financial markets made a flying start on Tuesday as US stimulus hopes encouraged risk takers, even though US President Donald Trump warned he is unsure if he wants to complete a trade deal with China.

Japan’s Nikkei 225 index leapt 1.7% after trading resumed following the long holiday weekend, while Australia’s S&P ASX 200 rose 1% propped by banks, miners, and property stocks.

But Hong Kong’s Hang Seng index was the regional outperformer, surging 2.3% on the back of rises by tech giant Tencent and casino stocks on news that Macau will gradually start re-issuing individual-visitor visas.

“The Macau government announced that Zhuhai will be the first Chinese city to be issued with Macau tourist visas from [Wednesday] 12 August. We believe this is the first significant step to gross gaming revenue recovery, as we expect other Chinese cities to follow in phases, similar to the recent Guangdong phased quarantine relaxation,” Jefferies analysts said in a note.

They said their base case was for a phased and gradual reopening with China issuing tourist visas on a province-by-province basis and potentially by cities within provinces.

Mainland stocks flat

But mainland Chinese stocks lagged with the CSI300 up just 0.66% with investors mindful of rising tensions between the US and China, including the ban of two prominent Chinese apps in the US and the threat of economic sanctions on several Chinese and US officials.

This sets a jittery tone ahead of the Sino-US video conference on Saturday August 15 to talk about bilateral issues and the phase-1 trade deal signed in January. Trump has taken an aggressive position and markets are bracing for a Beijing reaction.

“We view China differently than we did eight months ago,” said Trump at a briefing. “I do not know if we want to have a deal with China.”

Investors remain positive the US will push through a stimulus package as Trump’s executive actions are not sufficient stimulus in the absence of an act of Congress.

“Passage of a new stimulus bill will buttress the households, businesses, and the stock market. By issuing executive orders, Trump has shown he has no patience for Congress’s dithering. This will resonate with voters, but only so far. A full stimulus bill needs to be signed and disbursed to sustain his rebound in popular opinion,” BCA Research analysts said in a note.

Credit markets are seeing a busy new issue pipeline with Hangzhou Qiantang’s unrated bond, MTR Corporation’s green bond and Redco Group’s 364-day note in the market. Malaysia’s Axiata Group has hired banks for a sukuk and a conventional 30-year dollar bond.