Market Close Feb 09

Reflation trade boosts Asia

Weak US dollar boosts commodities; Inflation could surprise in the near term; Bitcoin may hit $60,000 by Q1-end: analyst

Reflation trade boosts Asia
Photo: Reuters

(ATF) Hong Kong: Asian markets were broadly higher on Tuesday as the reflation trade propelled assets to new highs with cryptocurrencies grabbing centre-stage.

“The reflation trade is alive and well if you look at rates (bear steepening), commodities (oil and copper at highs), stocks, bitcoin, or inflation expectations,” wrote Stephen Innes, Chief Global Market Strategist at Axi.

Japan’s Nikkei 225 index advanced 0.40% and Hong Kong’s Hang Seng index added 0.53%. China’s CSI300 surged 2.19% after reporting zero locally transmitted infections for a second day and following a jump in auto sales. But Australia’s S&P ASX 200 retreated 0.86% amid rising tensions with China. Regionally, the MSCI Asia Pacific index added 0.41%.

“Asia is on a roll,” said Herald van der Linde HSBC’S Head of Equity Strategy, Asia Pacific. “So far, earnings have been better than expected and analysts are revising numbers higher. Shortages in containers and chips are the talk of the town. And hopes of a return in travel led to a surge in Macau gaming stocks last week.” 

But he warned Asian equities may have been overzealous in anticipation of higher near-term inflation.

Equities ‘wobble'

“We might see a wobble in Asian equities as they digest a reversal of recent trends: as short-dated real bond yields rise, valuations in Asian equities will see a reality check,” he said.

Bitcoin rose to a new peak of $48,216 notching up gains of 62% this year, on top of a 300% rally last year.

Shares of companies that provide trading platforms for bitcoin and the technology to "mine" the cryptocurrency surged in China, South Korea and Australia. Big computer chip-making companies such as SK Hynix also rose.

“The institutional demand story for cryptocurrencies just got justified,” said Edward Moya, Senior Market Analyst, New York, OANDA. “Tesla’s SEC filing was the catalyst that disrupted the crypto-haters base case that there really isn’t institutional interest behind this move in cryptos.

“Bitcoin volatility remains elevated, but it looks like we are at the beginning of the breakout from a consolidation pattern. If crypto-mania continues, $60,000 could become a reality before the quarter ends.”

Also on Asia Times Financial

Asia Stocks

  • Japan’s Nikkei 225 index advanced 0.40%
  • Australia’s S&P ASX 200 retreated 0.86% 
  • Hong Kong’s Hang Seng index added 0.53%
  • China’s CSI300 surged 2.19%
  • The MSCI Asia Pacific index added 0.41%.

Stock of the Day

Bitcoin rose to a new peak of $48,216 late in Asian trade and rival cryptocurrency Ethereum struck a record high of $1,784.85, catching the bids from investors looking for alternatives to the US dollar because of the U.S. Federal Reserve's near zero interest rate policy.

economy China asia equities