Market Close Dec 21

New virus strain sickens markets

Virus strain, travel suspension spooks investors; China outperforms after CEWC signals continued support; US Treasuries rally

New virus strain sickens markets
The headline says it all. Britain's Prime Minister Boris Johnson has been forced to introduce tougher coronavirus restrictions for London and the southeast of England, cancelling Christmas gatherings for those in the 'tier 4' category and announcing a "stay at home" order to slow a new coronavirus strain that is significantly more infectious. Residents in those areas must stay at home until at least December 30, meaning a third of England's population cannot travel or meet other households for Christmas. AFP photo by Paul Ellis.

(ATF) Hong Kong: Asian markets were broadly lower after reports of a new variant of the coronavirus in the United Kingdom set off alarm bells with several countries suspending travel to a nation already grappling with failed Brexit talks. 

“The new strain transmits more easily than the previous variant but there is no evidence that it is more likely to cause severe disease or mortality,” a UK government website said.

Hong Kong’s Hang Seng benchmark slid 0.72%, Japan’s Nikkei 225 index dipped 0.18%, Australia’s S&P ASX 200 benchmark was flat and the regional MSCI Asia Pacific index slipped 0.91%.

But mainland China’s CSI300 index outperformed, adding 0.94% after the country's annual Central Economics Work Conference (CEWC), which ended on Friday, signalled supportive policies for housing, manufacturing and domestic demand driven industries.

“The readout suggests that policymakers are keen to withdraw stimulus and renew attention to longer-term financial risks but will do in a carefully phased manner,” Eurasia Group said in a note.

China: 'No sharp turns' 

“Indeed, the language here is a bit more cautious than expected, stressing a balance between 'continuity, stability and sustainability' and pledging 'no sharp turns' in policy.”

Some analysts are expecting changes in the interest rate policy next year after the CEWC signalled the upcoming rise by terming the monetary stance as “prudent”, and that policy would be “reasonable” and “appropriate”. 

“That may seem like a minor addition. But subtle changes in language have flagged forthcoming policy shifts in the past. We expect PBOC policy rates to rise by 30bps in 2021, whereas most analysts think the PBOC will remain on hold,” said Julian Evans-Pritchard, Senior China Economist at Capital Economics after the PBOC held rates steady on Monday. 

Meanwhile, investors scrambled to the safety of US Treasuries with the 10-year yield falling 4 basis points to 0.89%, which also contributed to the recovery of the dollar whose value against a basket of currencies jumped 0.9% to 90.78.

ATF China Bond 50 Index: US set to draw focus of China bond investors

Also on Asia Times Financial

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Japan approves record budget as pandemic spurs spending spree

Nio signs deal with State Grid as EV drive gathers pace

Carrie Lam's cash stash and the future of the dollar

Asia Stocks

· Japan’s Nikkei 225 index dipped 0.18%

· Australia’s S&P ASX 200 edged down 0.08% 

· Hong Kong’s Hang Seng index declined 0.72%

· China’s CSI300 added 0.94%

· The MSCI Asia Pacific index slipped 0.91%

Stock of the day

JD Health jumped 12.2% after it reported a surge in the number of JD Health users and those who paid for health services. It also topped the volumes of shares traded on the Hong Kong Stock Exchange. 

Asian markets Covid clampdown in UK virulent new strain China outperforms US Treasuries rally