Market Close Dec 10

Markets tripped by stalled stimulus talks, US-China tensions 

British pound defensive ahead of deadline; China default fears loom after credit growth; Elevated US-China tensions dampen sentiment

Markets tripped by stalled stimulus talks, US-China tensions 
Chipmaker SMIC is one of the companies that will see its shares removed from S&P DJI indexes.

(ATF) Hong Kong: Asian markets retreated on Thursday after US stimulus talks stalled and US-China tensions intensified after Beijing revoked some visa exemption treatment for American diplomatic passports.

Meanwhile, S&P Dow Jones Indices announced that 10 Chinese companies included in its benchmarks will be ineligible for inclusion from December 21, following a Trump administration executive order. The index creator will also remove securities issued by 18 Chinese companies from its fixed-income indices before January 1. 

At the weekend, index provider FTSE Russell said it will drop eight Chinese companies from its indexes after a US order issued last month restricted purchase of their shares.   

Japan’s Nikkei 225 index slipped 0.23%, Australia’s S&P ASX 200 retreated 0.67%, Hong Kong’s Hang Seng index eased 0.35%, China’s CSI300 dipped 0.04%. Regionally, the MSCI Asia Pacific index dropped 0.30%.

While data showed that Chinese credit growth was strong in November, driven by government bond issuance there were worries that some of this fiscal money is not being well spent.

“There is also some local government bond issuance related to investment in advanced technology projects, some of which may not yield a fruitful result,” said Iris Pang, ING Bank’s Chief Economist, Greater China. 

“How will investors be paid back in three to five years from now? This is a long-term issue that the government has some time to think through. Otheriwse, another round of deleveraging reform will be needed in a few years' time.”

The British pound remained on the backfoot after a meeting between Boris Johnson and EU chief Ursula von der Leyen to break the Brexit trade deadlock did not yield a result. The currency fell 0.6% to 1.33 to a dollar. A Brexit deal must be sealed by Sunday or there will be no deal, the two sides agreed.

More weakness was seen for the beleaguered currency.

“The bigger driver of pound/dollar is the direction of global equities, equities may be due a breather. If, for example, stocks corrected by 10%, cable could easily retest 1.25,” said Macro research firm BCA Research in a note. “Hence, any break-out of cable into the high 1.30s is a tactical selling opportunity.”

Also on Asia Times Financial

Foreign Exchange:.

Asia Stocks

  • Japan’s Nikkei 225 index slipped 0.23%
  • Australia’s S&P ASX 200 retreated 0.67% 
  • Hong Kong’s Hang Seng index eased 0.35%
  • China’s CSI300 dipped 0.04%
  • The MSCI Asia Pacific index dropped 0.30%.

Stock of the day

Global mining giant Vedanta bonds rallied after it successfully completed a $1 billion bond sale. Last week, Moody’s Investors Service downgraded its rating on its “persistently weak liquidity and high refinancing needs”. Vedanta’s bonds due 2022, 2023 and 2024 rose by 3-5%. 

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