Market Close Aug 19

US anti-China rhetoric keeps investors on edge

US Treasuries strong ahead of FOMC’s July meeting minutes; Japan exports spring positive surprise; Bank rally lifts Australian stocks

US anti China rhetoric keeps investors on edge
Markets were pressured by US-China tensions. Representational image: Reuters.

(ATF) Hong Kong: Investors were cautious in Asia today, where markets were pressured by US-China tensions after a firm start on the back of record highs at Wall Street.

Hong Kong’s markets had a delayed start due to a typhoon with the Hang Seng Index easing 0.74%.

The mainland CSI300 benchmark retreated 1.50% amid rising tensions as worries mounted after US President Donald Trump confirmed he had cancelled talks with China and was not ready to resume talks.

“I don’t want to deal with them now. With what they did to this country and to the world, I don’t want to talk to China right now,” Trump said.

Tensions have also heightened after the US State Department asked colleges and universities to divest from Chinese holdings in their endowments, according to Bloomberg News.

“Beijing's reaction to the heightened US rhetoric and non-tariff measures have remained targeted and outside of bilateral trade realm, due to considerations of ensuring job market stability and retaining the global supply chain,” Morgan Stanley analysts said in a note.

“That said, risks to the implementation of the Phase-1 deal could rise as escalation in non-tariff actions erodes goodwill, such as large-scale financial sanctions on major Chinese banks in relation to the Hong Kong situation.”

Gold eased marginally to $1,988 and has failed to break the $2,000 level again.

The risk-off environment is boosting demand for US Treasuries, as well with the 10-year yield down 2 basis points at 0.65%. The US dollar remains on the defensive below the 93 mark against a basket of currencies.

Japan’s Nikkei eked out gains inching up 0.26% and Australia’s S&P ASX 200 advanced 0.72% as the start of the earnings season saw banks rallying on the back of strong results from ANZ.

Japan’s index rose after the drop in export values in July marked an improvement from the previous month.

“The July trade data are consistent with our view that net exports will provide a large boost to Q3 GDP growth,” Marcel Thieliant, senior Japan economist at Capital Economics, said.

“Looking ahead, the export climate index, a weighted average of the PMIs of Japan’s trading partners, rose above 50 in July and points to a strong rebound in export volumes.”

Credit markets are witnessing a steady stream of primary deals with Wynn Macau reopening its 2026 bonds and Nan Fung International issuing a bond mandate. Overnight Hysan Development priced a perpetual bondICBC Financial Leasing sold a keepwell supported bond, and Yangzhou Construction issued a 3-year bond.

ATF China Bond 50 Index: Bonds rise ahead of Loan Prime Rate August Fixing

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Asia Stocks

· Japan’s Nikkei 225 index edged up 0.26%

· Australia’s S&P ASX 200 added 0.72% 

· Hong Kong’s Hang Seng Index eased 0.74%

· China’s CSI300 retreated 1.50%

· The MSCI Asia Pacific index rose 0.39%.

Stock of the day

Drugmaker Innovent Biologics rose as much as 11.7% after it entered into an agreement with Eli Lilly and Company, an anti-PD-1 monoclonal antibody immuno-oncology medicine that was co-developed by the Company and Lilly in China. Under the deal the Company will receive an upfront payment of US$200 million and will be eligible for up to $825 million if potential development and commercial milestones are reached, as well as tiered double-digit royalties on net sales.