Asian investors take breather after latest stocks surge

Hong Kong (AFP) – Asian markets were mixed Tuesday after their latest rally, with investors awaiting the corporate earnings season with some optimism after a run of upbeat economic data that has offset fears of a virus second wave.

While several countries are suffering a fresh surge in infections — particularly the United States — the ongoing easing of lockdown measures and reopening of economies has been the key driver of a months-long surge across equities.

After the latest advances, which saw Shanghai hit a two-year high and the Nasdaq on Wall Street end at another record, traders stepped back.

However, there are expectations of more gains, particularly as governments and central banks around the world are providing a multi-trillion-dollar backstop.

Shanghai led advancers, climbing more than one percent, having surged almost six percent Monday as retail investors piled back into the market.

Observers also pointed to an editorial in the China Securities Times that said fostering a “bull market” after the virus crisis was crucial to kick-starting the world’s number two economy.

The composite index is up around 13 percent over the past week, though there are worries about another bubble similar to the one that burst four years ago and sparked a global rout.

“China’s army of retail investors seem to be perfectly able to look through the worrying Western media headlines of another global coronavirus record,” said AxiCorp’s Stephen Innes.

“Instead, they are listening to the enthusiastic chorus from the nation’s influential state media, which are universally singing bullish from the same song page.”

He cited reports saying there had been a recent surge in new brokerage account openings.

– ‘Not as bad’ as feared –

Sydney edged up 0.1 percent, while Wellington and Jakarta each put on 0.3 percent.

But Hong Kong dipped 0.2 percent, having climbed more than six percent over the previous four trading days, while Tokyo, Seoul, Taipei and Manila were also in negative territory.

Traders have for weeks been trying to balance the reopening of economies with worries about the disease as it continues its march across the planet.

On Monday there was more positive data, with an index of the US service sector — which makes up the vast majority of the economy — seeing its biggest-ever jump in June to beat forecasts.

But that came as several states reported new daily records for new cases as officials struggled to bring the outbreak under control and some reimposing lockdowns.

“Investors have recognised that as bad as the economy in the US is, it’s not as bad as what people thought it would look like in March and April,” said Nancy Prial at Essex Investment Management.

“The market has started to sense we might see better-than-anticipated results fairly broadly across a wide spread of companies.”

In a sign that the reporting season could be positive, Samsung Electronics said Tuesday it expects to see operating profit jump 23 percent in the second quarter, which is much better than the single-digit fall that analysts had forecast.

The firm appears to have benefited as lockdowns boosted its chip business with data centres moving to stockpile DRAM chips to meet surging demand for online activities.

– Key figures around 0230 GMT –

Shanghai – Composite: UP 1.5 percent at 3,381.75

Tokyo – Nikkei 225: DOWN 0.6 percent at 22,587.73 (break)

Hong Kong – Hang Seng: DOWN 0.2 percent at 26,288.43

West Texas Intermediate: DOWN 0.1 percent at $40.61 per barrel

Brent North Sea crude: DOWN 0.1 percent at $43.05

Euro/dollar: UP at $1.1322 from $1.1308 at 2100 GMT

Dollar/yen: DOWN at 107.27 yen from 107.39 yen

Pound/dollar: UP at $1.2509 from $1.2489

Euro/pound: DOWN at 90.51 pence from 90.53 pence

New York – Dow: UP 1.8 percent at 26,287.03 (close)

London – FTSE 100: UP 2.1 percent at 6,285.94 (close)