Market Close Jun 08

Risk-taking boosted by re-openings, stimulus

US jobs data boosts risk rally; Japan markets lifted by street beating data; Vietnam CDS outperforms after EU FTA

by Umesh Desai
Risk-taking boosted by re-openings, stimulus
Asian markets have been buoyed by the US jobs data plus improved sentiment in Japan and Vietnam. File photo: AFP.

(ATF) Hong Kong: Financial markets rode the optimism triggered by Friday’s blowout US jobs data although caution around tensions between the world’s two biggest economies capped gains.

The US economy regained 2.5 million jobs in May and the unemployment rate dropped to 13% as coronavirus pandemic shutdowns began to ease.

Japan’s Nikkei benchmark outperformed the region after a better than expected economic performance in the March quarter, triggering upgrades from analysts.

The Nikkei 225 jumped 1.37% after Japan’s economy contracted by 0.6% in the January-March period compared to the previous quarter. Authorities had initially reported a 0.9% contraction.

“As the economic watchers’ survey indicated improved economic activity in line with the lifting of containment measures, real GDP growth could turn positive in the third quarter of 2020, unless a rapid increase in confirmed cases prompts the government to introduce stricter containment measures again,” Harumi Taguchi, principal economist at IHS Markit, said, while upgrading its forecast for Japan’s real GDP growth to a contraction of 4.9% in 2020 before a rise of 1.8% in 2021. It had earlier forecast a contraction of 5.5% this year.

Hong Kong’s Hang Seng benchmark was flat and mainland China’s CSI 300 stocks benchmark advanced 0.52%.

“The better employment data, the ongoing lifting of the lockdown around the world, and announcements of further support for growth through easing monetary conditions and additional fiscal measures will only reinforce the positive mood in the markets,” Gary Dugan, chief executive officer at The Global CIO Office, said.

Credit markets rally, Hanoi-EU trade deal

Asian credit markets rallied hard, attracting a fresh wave of issuance with Korea Electric PowerChampion REITUPL CorporationShanghai ConstructionGreenland and Central China Real Estate in the market with bond issues.

The Asia IG index was 6 basis points tighter at 80/82 bps while sovereign CDS moved in by 3-20 bps after Vietnam ratified a significant trade deal with the European Union, which is expected to boost the country’s manufacturing sector and exports. Effective in July, the EU will lift 85% of its tariffs on Vietnamese goods, gradually cutting the rest over the next seven years. Vietnam will lift 49% of its import duties on EU exports and phase out the rest over 10 years.

“The push to diversify out of China will find a home in Vietnam due to its competitiveness for labor-intensive manufacturing, coupled with cultural and geographical proximity,” Trinh D. Nguyen, senior economist at Natixis, said.

“We believe Vietnam’s future is bright, helped by proactive policy, geopolitical trends of diversification, and further liberalisation of its market, such as the EU FTA expected to come to force in summer 2020.”

Also on Asia Times Financial:

China posts trade surplus on soaring medical exports

This week: FOMC meeting, Asia money supply 

Greater credit differentiation called for in China LGFVs

State enterprises bankroll recovery in hard-hit Hubei 

Foreign Exchange: When Bloomberg and G/Sachs agree, watch your wallet

Asia Stocks

· Japan’s Nikkei 225 climbed 1.37%

· Australia’s S&P ASX 200 edged up 0.12% 

· South Korea’s Kospi inched up 0.11%

· China’s CSI300 advanced 0.52%

· The MSCI Asia Pacific index added 1.15%.

Stock of the day 

Coal mining company SouthGobi Resources rose as much as  8.9% after it said it had reached a settlement agreement with First Concept.