Chinese blue chips, HK gain hoist Asia-Pacific share prices to two-year peak

SINGAPORE — Chinese stocks led Asian markets higher on Monday as investors bet on a steady recovery for the world’s no. 2 economy, though caution about the fate of US stimulus kept the dollar fi rm and a central bank policy tweak unwound some of the yuan’s gains.

MSCI’s broadest index of Asia- Pacific shares outside Japan rose 0.8% to 2-1/ 2-year highs, buoyed by a 2% gain in Chinese blue chips and a 1.5% rise by Hong Kong’s Hang Seng index. Japan’s Nikkei slipped 0.3% as investors fretted about corporate earnings.

“If capital is moving on relative growth rates, then China is looking quite attractive,” said Chris Weston, head of research brokerage Pepperstone in Melbourne. Equities are cheap, yields advantageous and the outlook solid, he said.

“From a virus perspective as well, we’re seeing concerns in Europe, while China is considered a quasi-safe haven.”

China has returned from an eight day Mid-Autumn festival with investors encouraged by a robust rebound in tourism and ebbing coronavirus cases.

Qingdao city said on Monday it will conduct COVID-19 tests for the entire population of more than nine million people over five days after small number of new cases. Elsewhere, in the US midwest, infections are at record levels and the World Health Organization (WHO) is urging fresh curbs for Europe.

Coronavirus aid plans in the United States are also in disarray, with the Trump administration on Sunday calling on Congress to pass a stripped- down relief bill while talks on a more comprehensive proposal were again at an impasse.

S&P 500 futures wobbled either side of flat in the Asia session, while European futures edged higher.

Chinese blue chips have gained nearly 17% this year, compared with an almost 8% gain by the S&P 500. Foreigners’ buying of Chinese government bonds hit its fastest pace in more than two years last month.

In currency markets, a 0.4% drop in the yuan dragged the China-sensitive Australian dollar lower and underpinned small but broad gains for the dollar against other majors.

The People’s Bank of China has scrapped a requirement for banks to hold a reserve of yuan forward contracts, removing a guard against depreciation.

Traders said that suggested authorities were discomfited by recent gains in the currency. However the lack of an aggressively weaker setting of the onshore trading band cooled some of those concerns and the yuan pared losses a little.

The yuan is up more than 7% since late May and had shot higher on Friday as investors wagered that a Joe Biden presidency would drive smoother Sino-US relations. It last sat at 6.7211 per dollar in onshore trade.

The euro edged 0.1% lower to $1.1816 and the yen was broadly steady at 105.55 per dollar. The kiwi dipped 0.1% with the softer yuan to sit at $0.6661.

In commodity markets, oil prices were back under pressure after the resolution of an oilworkers strike in Norway and the resumption of production after a storm in the Gulf of Mexico.

Brent crude futures slipped 0.9% to $ 42.48 a barrel and US crude futures were down about 0.8% at $40.26.. —