Market Close Jul 15

Vaccine hopes deliver a booster shot

BoJ’s optimistic view on the economy; China GDP to show Q2 rebound; Vaccine quickest way for economic rebound, analyst says

Vaccine hopes deliver a booster shot
A market analyst said today: 'A vaccine is the only way to recession-proof the economy against coronavirus.' Moderna is seeking to be the first cab off the rank. Photo: AFP.

(ATF) Hong Kong: Financial markets are on a rebound riding optimism around the discovery of a successful vaccine to treat the coronavirus, ahead of data from the world’s second largest economy which is expected to be positive.

China will unveil data on Thursday that is expected to confirm its economy grew in the second quarter and will avoid sliding into recession. There is also broad expectation it will be the only major economy to grow this year.

“A vaccine is the surest and quickest way for the global economy to bounce back to pre-coronavirus levels. Social distancing would no longer be needed, shops and particularly the leisure and hospitality sectors could return to business as usual,” Fiona Cincotta, a market analyst at forex broker City Index, said.

“In short, a vaccine is the only way to recession-proof the economy against coronavirus. For this reason, the markets are so sensitive towards vaccine development news.”

A host of global pharmaceutical companies are in the race to launch a successful vaccine and drugmaker Moderna announced its vaccine led patients to produce antibodies that can neutralise the novel coronavirus although it caused minor side-effects in many of them.

Moderna is considered to be in a leading position in the race to find a vaccine against the coronavirus, which has infected more than 13.2 million people and killed 570,000.

Japan’s Nikkei 225 jumped 1.59% after the Bank of Japan made no interest rate changes and maintained the view that a moderate recovery is likely from the second half of the fiscal year.

“The Bank has refrained from cutting the policy rate further into negative territory despite the economy being hard hit by the Covid-19 outbreak. This is because the costs of further easing on the rate front likely outweighs the benefits,” HSBC chief economist James Lee said. “The economy is showing early signs of stabilisation, with job cuts stopping in May and retail sales posting a partial recovery.”

Australia’s S&P ASX 200 climbed 1.88% but Chinese equities eased as US President Donald Trump said he is “not interested in talking to China” on “Phase 2” trade negotiations.

Retaliatory sanctions

US-China tensions remain elevated as Beijing said it will impose retaliatory sanctions on US individuals and entities after Washington’s move.

In a related development, the UK ordered the complete removal of Huawei equipment from Britain’s 5G network by 2027, another move that is bound to draw a reaction from China.

China’s CSI300 benchmark ended down 1.29% and Hong Kong’s Hang Seng benchmark ended flat.

The credit market continues to be driven by yield-seeking flows with the Asia IG index moving in by 2 basis points to 78/79 and sovereign CDS 1-2 bps tighter. South Korea’s GS Caltex has announced a mandate for medium to long-dated dollar bonds and is currently holding investor meetings.

Chinese developer Greenland Holdings has set initial price guidance for a two-tranche bond offering likely to price today and Bright Foods has issued guidance for a euro-denominated bond also to price today. Goodman HK is in the market with a 10-year dollar bond expected to price later today and Philippine issuer Globe Telecom has hired banks for a potential two-tranche dollar bond offering.

Also on Asia Times Financial

Large deposits and withdrawals to be registered: PBoC 

China speeds up construction of data centres 

Japanese banking giant to issue stablecoin 

Japan to include CBDC in economic plan

Foreign Exchange: Why does Donald Trump want to push me?!

Asia Stocks

# Japan’s Nikkei 225 rose 1.59%

# Australia’s S&P ASX 200 advanced 1.88% 

# Hong Kong’s Hang Seng index ended flat

# China’s CSI300 retreated 1.29%

# The MSCI Asia Pacific index added 1.79%.

Stock of the day

The world's largest manufacturer of vaping equipment SMOORE International Holdings rose as much as 21% following the listing of its IPO last Friday.