Market Close Aug 24

Tencent propels regional outperformer Hang Seng index

USFDA nod enthuses bulls; Tencent rallies on report WeChat ban will not be as wide as feared; Fed's monetary framework review could see aggressive policy easing  

Tencent propels regional outperformer Hang Seng index
Tencent’s shares rose as much as 5.8% after Bloomberg News reported White House officials are reassuring American businesses that a ban on its WeChat app won’t be as broad as feared. File photo by AFP.

(ATF) Hong Kong: Asian markets are off to a flying start this week as a combination of a coronavirus treatment hopes, easing US-China tensions and bullish expectations from the Federal Reserve’s monetary policy framework review invigorated bulls.

The USFDA issued an emergency use authorisation (EUA) for investigational convalescent plasma for the treatment of Covid-19 in hospitalised patients in a move that is believed to lessen the severity or to shorten the length of Covid-19 illness.

Hong Kong’s Hang Seng benchmark was the regional outperformer jumping 1.74% as China’s technology giants propelled the index after Bloomberg news reported the ban on the WeChat app won’t be as broad as feared.

Japan’s Nikkei 225 index edged up 0.28%, Australia’s S&P ASX 200 added 0.30% and China’s CSI300 benchmark advanced 0.78%.

The risk-on environment meant that gold and US Treasuries fell. Gold dipped to a low of $1,930 per ounce before recovering to $1,950, still failing to break the psychological barrier of $2,000. And 10-year US Treasury yields rose 2 basis points to 0.65%.

Emerging markets were also emboldened by the weakness in the US dollar which weakened against a basket of currencies to a low of 92.89.

The Hang Seng benchmark is also being driven by the plan to include weighted voting right companies (WVRs) and secondary-listing companies in the index. The changes announced on August 14 will come into effect on 7 September 2020.

Major structural evolution in HK

“The stock market of Hong Kong is undergoing a major structural evolution,” said Winson Fong, senior portfolio manager at Manulife Investment Management.

“We think the 'return' of American depositary receipts (ADRs) and biotech IPOs will not only further enhance the breadth and depth of the market, but also offer more attractive fast-growing candidates to investors. The combination of a strong policy push and prolonged low-interest rate outlook can only accelerate investments in innovation sectors in China, and especially in the Greater Bay Area.”

Ahead of the change, China’s Banking and Insurance Regulator spokesman reiterated Beijing’s support for Hong Kong as a financial hub, saying that it will become more prosperous and stable in future.

A lot of attention will be paid to the US Federal Reserve’s monetary policy framework review where Chairman Jerome Powell will unveil how it will tackle the coronavirus impact on the world’s largest economy. Financial markets expect to hear more about inflation targeting given the negative real yields struck a record low last week. If average inflation targeting is adopted by the central bank, the markets expect more aggressive policy responses ahead. Traditionally organised in Jackson Hole, this year’s meeting will be online.

Asian credit markets were also firm with the benchmark Asia IG index moving in two basis points to 62/63 basis points. The primary markets are seeing a steady flow of issues with Jiangsu Kewei's SBLC backed 3-year bond, KT Corporations 5-year deal, and Guohui International’s 5-year transaction are in the market.  

Also on Asia Times Financial

China's digital yuan aims for a global future outside USD net 

China banks post H1 profit drop

China launches AI 'companions' to the public

Foreign Exchange:

Asia Stocks

# Japan’s Nikkei 225 index edged up 0.28%

# Australia’s S&P ASX 200 added 0.30% 

# Hong Kong’s Hang Seng index jumped 1.74%

# China’s CSI300 climbed 0.78%

# The MSCI Asia Pacific index advanced 1.22%.

Stock of the day

Gaming and social media giant Tencent’s shares rose as much as 5.8% after Bloomberg News reported White House officials are reassuring American businesses that a ban on its WeChat app won’t be as broad as feared. Tencent has the highest weightage in the IHS index, which was the regional outperformer.