Market Close Feb 18

Soaring yields spark funding cost worries

Hong Kong underperforms as jobless rate hits 17-year high; Bitcoin hovers around record levels; Corporates worry about higher funding costs

Soaring yields spark funding cost worries
A ferry makes its way across the harbour in Hong Kong. Government data published recently shows that unemployment is near a 17-year high. File photo by AFP.

(ATF) Hong Kong: Asian markets retreated amid worries about the impact of rising bond yields on corporate funding costs at a time when economic recovery is just starting to take root.

Financial analysts remain cautious about the new strains of the coronavirus that continue to emerge, although the vaccine roll-out and the pick-up in economic activity offset some of those concerns.

“While new Covid-19 infections have dropped, our Mobility Trackers have shown only a slight pick-up in activity as tight restrictions remain in place in many economies,” Kieran Tompkins, an assistant economist at Capital Economics, said. 

“Vaccine rollouts have been slow in the euro-zone and most [Emerging Markets], but much faster in the US, UK, Israel, and UAE. Israel’s experience suggests that governments may lift restrictions quite quickly once a high level of vaccine coverage has been reached.”

US 10-year Treasury yields rose a basis point to 1.29% and the dollar weakened 0.3% to 90.7 against a basket of currencies which helped boost gold prices up 0.5% to $1,785 per ounce.

Bitcoin traded off the new record high of $52,621 reached overnight, but still 0.5% higher at $51,675.

“There are no obvious technical levels to watch on the upside, except the big milestones like $55K, $60K etc,” Fawad Razaqzada, a Market Analyst at TF Global Markets, said.

Growing crypto demand

“Bitcoin remains fundamentally supported because of growing demand as major companies warm towards cryptocurrencies.”

Japan’s Nikkei 225 index dipped 0.19%, Australia’s S&P ASX 200 ended flat but Hong Kong’s Hang Seng index slid 1.58% underperforming the region and China’s CSI300 tumbled 0.68%. Regionally, the MSCI Asia Pacific index retreated 1.05%.

Hong Kong underperformed as government data published showed unemployment was near a 17-year high. The jobless rate in the Nov-Jan period increased to 7% from 6.6% in October - December 2020.

"The labour market was under notable pressure in November 2020 - January 2021 due to the fourth wave of local epidemic,” Secretary for Labour and Welfare Dr Law Chi-kwong said.

“Although the fourth wave of local epidemic has shown signs of easing lately, the labour market will remain under pressure in the near term as it will take time for economic activities to return to normal.”

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Asia Stocks

· Japan’s Nikkei 225 index dipped 0.19%

· Australia’s S&P ASX 200 ended flat 

· Hong Kong’s Hang Seng index slid 1.58%

· China’s CSI300 tumbled 0.68%

· The MSCI Asia Pacific index retreated 1.05%.

Stock of the day

Texhong Textiles shares surged 37% after a report it will invest $100m in a new yarn plant in Vietnam’s northern Quang Ninh province making cotton core-spun yarns.

Asia markets Hong Kong unemployment Covid-19 4th wave bitcoin Treasury yields