Market Close Mar 30

Undertone firm awaiting more US stimulus

China bond inclusion terms disappoint; Australia underperforms on virus outbreak; Archegos collapse impact limited

Undertone firm awaiting more US stimulus
The headquarters of Credit Suisse is seen in Zurich in this Reuters photo from March 24, 2021. The Swiss bank and Japan's Nomura are believed to be one of the biggest losers in the downfall of Archegos Capital, which could cost up to $6 billion. 

(ATF) Hong Kong: Asian markets made tentative gains after the collapse of US family office Archegos Capital was seen contained in its impact and the attention was focused on President Joe Biden’s speech, which will reveal spending plans and details of the ramped-up vaccine efforts.

US Treasuries fell and the 10-year yield jumped 6 basis points to 1.77% ahead of Biden unveiling a further $1-3 trillion of stimulus.

“Higher yields and a stronger US dollar are entirely reasonable assumptions – the US economy is well on its way to digging itself out of the pandemic,” Stephen Innes, Axi's Chief Global Market Strategist, said.

“Massive fiscal stimulus is now literally hitting doormats, and the signs are US President Biden has an enormous infrastructure plan for later this year. Why wouldn't yields rise?”

Japan’s Nikkei 225 index edged up 0.16%, Hong Kong’s Hang Seng index rose 0.84%, China’s CSI300 advanced 0.95% but Australia’s S&P ASX 200 slipped 0.90% after the growing coronavirus cluster in Brisbane cast a shadow over the market’s near-term outlook. Regionally the MSCI Asia Pacific index dropped 0.81%.

The collapse of Archegos, run by former Tiger Asia manager Bill Hwang, which sparked liquidation in excess of $30 billion, was seen to have limited impact even as banks like Nomura and Credit Suisse took a hit.

“Reforms and regulations imposed since the Global Financial Crisis have ultimately reduced banks’ vulnerability and financial system exposure to systemic risk. Thus, Friday’s event is likely to remain contained, with no broader macro implications,” macro research firm BCA Research said.

The dollar rose 0.3% against a basket of currencies to 93.17 pushing down the price of gold 2.3% to $1,693 per ounce.

The yuan fell as China’s inclusion into the widely followed World Government Bond Index was met with disappointment because of the lengthened inclusion period and delay in the inclusion starting date.

There were other causes for disappointment too, which brought the yuan down to a four-month low of 6.57 to a dollar.

"Announced index weight of 5.25% came in lower than our prior estimates,” said Duncan Tan, a DBS Rates Strategist, who had expected the weightage to be 6.5%.

“The lower weight is due to a change to the minimum amount outstanding criteria where the threshold for CGBs issued before 1 January 2020 has been increased to 100 billion yuan from 35 billion.”

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Asia Stocks

· Japan’s Nikkei 225 index edged up 0.16%

· Australia’s S&P ASX 200 slipped 0.90% 

· Hong Kong’s Hang Seng index rose 0.84%

· China’s CSI300 advanced 0.95%

· The MSCI Asia Pacific index dropped 0.81%.

Stock of the day

China-based e-commerce platform Meituan shares rose as much as 5.3% after UBS and Jefferies put out buy recommendations. Jefferies reiterated a buy recommendation after raising the target price to HK$400 from HK$394. While UBS also kept a buy recommendation, it cut its target price to HK$420 from HK$470.

Asia markets China bonds Australia Covid outbreak