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Vaccine optimism drives markets higher
Financial hub Singapore suffered its worst contraction in 2020.
Optimism about the economic outlook in 2021 helped investors kick off the new year on a positive note yesterday, as hopes surrounding the rollout of coronavirus vaccines offset a frightening surge in infections.
With uncertainty over Brexit and a new US stimulus gone, sights are now on the economic recovery from the calamity that was 2020, with a broad expectation that countries will enjoy strong rebounds as life gets back to some semblance of normal.
Vast amounts of government and central bank cash have been a crucial driver of a global rally in equities from their March troughs, and analysts expect loose monetary policies — particularly at the Federal Reserve — to stay in place for the foreseeable future.
“Stock markets are headed higher and they are headed higher without the old traditional valuation techniques as long as the Fed keeps the liquidity bubble going,” David Kotok, at Cumberland Advisors, told Bloomberg TV.
However, while the consensus is for a strong performance for markets this year, he does warn that the first quarter will likely be tough as vaccinations are administered but the virus continues to spread.
Seoul rallied 2.5% following strong export data, while Sydney put on more than 1% as there were signs a spike in new infections in the city was being brought under control.
Hong Kong rose, though China Mobile Limited, China Telecommunications Corp and China Unicom (Hong Kong) Limited all dipped after the NYSE said last week that it would delist them following the US government’s move in November to block investment in 31 firms it says are owned or controlled by China’s military.
State-owned oil giants CNOOC and Petrochina were also hit on speculation they could be next in line.
Shanghai, Singapore, Taipei, Mumbai, Manila and Jakarta also began the year on a positive note.
But Tokyo fell as investors fretted over reports that Japanese Prime Minister Yoshihide Suga was considering issuing a regional state of emergency for the capital and surrounding areas as new virus cases soar.
Still, Rakuten Securities said the Nikkei could hit 30,000 by September as people are vaccinated.
The broad gains in Asia came after the Dow and S&P 500 finished at fresh records on Wall Street.
“Covid cases and vaccine distribution will remain the key focus for investors for now. The political forces that influenced markets late in 2020 have almost faded as the US election and Brexit have passed,” said Kerry Craig at JP Morgan Asset Management.
“Without the wide distribution of vaccines, the paths of Covid and the economy are locked together, given the impact on social mobility and economic curtailment. This link will be broken as immunity levels rise into the middle of the year, but until then the economic path will be bumpy.”