Asian markets make strong gains, thanks to earnings and easing tensions in Korea

20-Apr-2018 Intellasia | Marketwatch | 6:00 AM Print This Post

Asian equities Wednesday largely built on gains in the US and Europe the day before, but small-cap Chinese stocks continued to lag behind on concerns about trade and the country’s economy.

Equities there started higher, fell when small-caps declined, then recovered again late in the day.

Indexes in Shenzhen, where many smaller firms and tech-related companies are listed, fell as much as 3 percent Tuesday following the US ban on American companies selling products to Chinese telecom-equipment maker ZTE 0763, -1.92 percent The move also hit tech-related shares in other Asian markets Tuesday. The Shenzhen indexes fell a further 1 percent Wednesday morning.

Sean Quek, head of equity research at OCBC Bank, highlighted ongoing trade tensions and liquidity concerns. He said the Chinese government’s crackdown on shadow banking has led to higher borrowing costs for some mainland companies.

Yet as Chinese big-caps fared better, the Shanghai Composite SHCOMP, +0.97 percent snapped a string of four straight declines to finish up 0.8 percent Wednesday. It logged an 11-month closing low Tuesday and had spent part of Wednesday’s session in the red.

Interest-rate concerns weighted in Hong Kong HSI, +1.28 percent, where stocks have also lagged behind in recent days as the local dollar there hit the weak end of its trading band against the US dollar. That’s prompted currency-market intervention by the city’s de facto central bank.

A heavy lineup of initial public offerings there is looming next week, said Ivan Ip, a stock strategist at UOB Kay Hian in Hong Kong. That could sap broader market liquidity and lead to a possible increase in short-term interest rates, he said.

Financials were bright spot in Chinese stocks Wednesday, with large companies seeing near 0.5 percent stock gains after the People’s Bank of China cut banks’ reserve requirements.

While the move will free up some 1.3 trillion yuan ($206.8 million), lenders must use some two-thirds of that money to pay off short-term debts owed to the central bank. That will limit the cut’s economic and market impacts, analysts at Mizuho Bank said in a note to clients.

The weakness in China came as indexes in trade-dependent Japan NIK, +0.39 percent, South Korea SEU, +0.28 percent and Singapore rose at least 1 percent Wednesday. Helping that were additional indications of easing tensions on the Korean Peninsula.

Softness in the yen USDJPY, +0.18 percent helped boost Japanese stocks while Korea’s Kospi SEU, +0.28 percent was aided by a 2.6 percent jump in heavyweight Samsung Electronics 005930, +2.69 percent following strong gains in US tech stocks Tuesday.

Advances in other Asian stock markets were much more modest, with indexes up no more than 0.5 percent.

Geopolitical events have recently “sort of muffled” strong earnings growth in Asian equities, said Kerry Craig, global market strategist at J.P. Morgan Asset Management. Fundamentals for the region are still good, he said, with valuations for the MSCI Asia Pacific index, excluding Japan, trading near its 15-year historical average.

In commodities, oil moved higher in Asian trading after industry-group data showed US crude and gasoline inventories fell more last week than what analysts expect will be reported by the government Wednesday. Futures CLK8, +0.54 percent were recently up 0.5 percent.


Category: FinanceAsia

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