Market Close Feb 01

Silver shines in rare day trader rally 

Silver lifted by day trader frenzy; Weak dollar consensus view under threat; China economic rebound fumbles 

Silver shines in rare day trader rally 
Hong Kong’s Hang Seng index vaulted 2.15% on Monday.

HONG KONG: Asian markets rallied as a short squeeze fuelled retail rally-boosted sentiment even as the global economic recovery stumbled.

China’s money market injection gave hope to stock markets after signs of tightening liquidity had dampened the mood last week.

Japan’s Nikkei 225 index jumped 1.55%, Australia’s S&P ASX 200 added 0.84%, Hong Kong’s Hang Seng index vaulted 2.15%, and China’s CSI300 advanced 1.23%. Regionally the MSCI Asia Pacific index rose 0.96%.

Read more: Kirin’s Myanmar adventure in danger of falling flat after coup 

“We find some of the commentaries around the Reddit readers' assault' on the equity market as disingenuous. Just because someone does not have substantial wealth does not make them any less intelligent about investing markets,” said Gary Dugan, CEO at Purple Asset Management.

“Bottom line we see room for profit taking, but there is too much money on the sidelines waiting to go back in. If it’s a bubble – it can probably get still larger.”

But there was a fumble in the seven-month old rebound in the world’s second largest economy as China's factory activity expanded in January at the slowest pace since last June. The momentum of both supply and demand weakened, dragged by subdued overseas demand.

“We should pay attention to the effectiveness of domestic epidemic prevention amid the ongoing pandemic, and look at how to bring new momentum to the Chinese economy as uncertainties over overseas demand continue,” said Wang Zhe, Senior Economist at Caixin Insight Group.

SHORT SQUEEZE

Silver was the major outperformer surging 12% after the metal grabbed the spotlight on speculation that it would be targeted by retail investors seeking assets likely to be in a short squeeze. Gold rode the silver rally adding 1% to $1,865 per ounce.

US Treasuries suffered in the risk on environment with the 10-year yield rising 2 basis points to 1.08%. But the dollar extended gains which some analysts said may stem from the market selling local currencies to buy gold, silver and even bitcoin.

The greenback rose 0.3% to 90.81 against a basket of currencies. But the jury was out on the fundamental strength of the dollar.

“This consensus view of weaker US dollar could be derailed in two scenarios: One, if the global picture gets very bad, but we believe that globally we are through the worst, and emerging markets in particular. Two, if the US is doing better than the rest of the world, which is a possibility under the Biden administration,” said Patrick Zweifel, Pictet Asset Management’s chief economist.

Asia Stocks

· Japan’s Nikkei 225 index jumped 1.55%

· Australia’s S&P ASX 200 added 0.84% 

· Hong Kong’s Hang Seng index vaulted 2.15%

· China’s CSI300 advanced 1.23%

· The MSCI Asia Pacific index rose 0.96%.

Stock of the day

Drugmaker CanSino Biologics shares rose as much as 25.75% after it said that the phase III clinical trial of its Recombinant Covid-19 Vaccine had successfully met its pre-specified primary safety and efficacy criteria at this interim analysis. 

Also on ATF:

Asia braces for Reddit volatility as Citadel faces GameStop fallout

Yuan rising in an updraft, further appreciation likely

Silver Hang Seng Nikkei CSI300