Market Close Oct 21

Yuan soars on resurgent economy

Yuan rises to 2-year highs; Dollar seen weakening further on prospects of a Democrat win; Gold benefits from weak dollar

Yuan soars on resurgent economy
Cambodian women work in a garment factory in Kandal province in this file pic from late 2018. The pandemic has caused a race to the bottom that could push tens of millions of Asian garment workers into greater hazard on the factory floor, the ILO said on Wednesday. About 40% of workers furloughed or laid off by the Covid crisis were not back at work by the third quarter and those who do return could lose hard-won labour rights, the agency said. Photo: Reuters.

(ATF) Hong Kong: Asia markets were broadly higher propelled by stimulus bulls who expect the US will soon unveil a package to support the world’s largest economy.

“Stimulus of any size above $1.8 trillion – which is what the White House has reportedly proposed – in coronavirus relief should be positive for the markets, and really positive if the deal is closer to the Democrat’s $2.2 trillion proposal,” said Fawad Razaqzada, Market Analyst at TF Global Markets.

Japan’s Nikkei 225 index climbed 0.31%, Australia’s S&P ASX 200 edged up 0.12%, Hong Kong’s Hang Seng index added 0.75% and the MSCI Asia Pacific index added 1%.

Hong Kong outperformed after signs emerged the Special Administered Region’s economy was improving as retail sales rebounded and property prices remained resilient.

“With the largely stabilised Covid outbreak in China, we expect the border to re-open in the first quarter of 2021 – this would be a powerful pull factor for the economy,” said DBS economist Samuel Tse, who said it could raise the 2021 GDP growth forecast up to 4.0% from 0.5%.

The yuan extended gains to its strongest level against the dollar in more than two years on growing optimism about China's economy and speculation that a victory for US Democrat presidential candidate Joe Biden next month will lead to better Sino-US ties. The onshore yuan jumped to 6.6444 per dollar, the strongest since July 2018.

US Treasuries extended their slide as the prospects of fiscal spending triggered supply fears. The 10-year yields rose 3 bps to 0.81% and the US dollar weakened against a basket of currencies by 0.3% to 92.77. This triggered demand for gold with the metal rising 0.5% to $1,917 per ounce.

A potential win for Democrat candidate Joe Biden was also increasing the pressure on the US dollar amid prospects of aggressive fiscal stimulus plans and infrastructure spending.

“The USD is likely to weaken, possibly dramatically and because the Fed will keep rates at low levels for a considerable period of time, markets will interpret higher infrastructure spending as being an inflationary development,” said Peter Kinsella, UBP’s Global Head of Forex Strategy. 

“The USD tends to sell off during periods of global economic expansion, and we think that this time will not be different. Additionally, the prospect of a Democratic administration may increase pressure on the Fed to maintain an extraordinarily loose monetary policy stance over the coming years.”

ATF China Bond 50 Index: Financials lead bond gains as commercial banks keep LPR steady

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China acquires Japanese chipmaking machines for leap into 3G fabs

Malaysia backs Australia's Lynas to build rare earth processing plant

China hits Aussie exports but there's one commodity they won't touch

China central bank launches fintech development indicators

The digital yuan/RMB is securing a seat at the table

Asia Stocks

· Japan’s Nikkei 225 index climbed 0.31%

· Australia’s S&P ASX 200 edged up 0.12% 

· Hong Kong’s Hang Seng index added 0.75%

· China’s CSI300 ended down 0.01%

· The MSCI Asia Pacific index added 1%

Stock of the day

Cathay Pacific Airways rose as much as 6.6% after it announced a restructuring aimed at cutting 8,500 jobs and “will lead to a reduction of approximately HK$500 million in monthly cash outlay by the Group in 2021”.

Asian markets yuan surge USD weak