HONG KONG – Asian equities mostly rose today, continuing the recent volatile theme in global markets as optimism over economic recovery and coronavirus vaccinations plays off against concerns about the fast-spreading Delta variant and China’s regulatory crackdown.
A forecast-beating corporate earnings season and constant reassurance from the United States Federal Reserve over its ultra-loose monetary policies have also been unable to soothe fears that the outlook may not be as rosy as initially hoped, with sentiment changing day by day.
Still, this morning was an up day following a record close for the S&P 500 on Wall Street and helped by some bargain hunting.
The spread of Delta remains the major stumbling block to recovery as a sharp spike in new infections around the world forces some governments to reimpose strict containment measures.
And, the main worry for markets is China, where millions of people have been put under lockdown and officials have announced travel restrictions in some areas.
The country had brought domestic cases down to virtually zero after Covid-19 first emerged in Wuhan in late 2019, but it is now facing its worst outbreak in months.
“While China’s resolve to control outbreaks has been well illustrated, markets will continue to watch the outbreak given the high transmissibility of the Delta variant,” said National Australia Bank’s Tapas Strickland.
“There are also concerns that China’s domestic vaccines are less effective against the Delta variant.”
The brewing crisis in China has even led Nomura to cut its economic growth prediction for the third quarter and the year.
“The draconian measures taken by the government are resulting in potentially the most stringent travel bans and lockdowns in China since the spring of 2020,” said Lu Ting, Nomura’s chief economist for China, adding that recent deadly floods contributed to its decision.
Delta ‘won’t stop recovery’
Meanwhile, there is a worry that oil demand in the world’s No. 2 economy could tumble as a result of the tough new measures, putting downward pressure on prices.
However, analysts remain broadly optimistic that while Delta is a concern, it is unlikely to have as big an impact on growth as last year, even as the Infectious Diseases Society of America said the variant could push the threshold for herd immunity towards 90% from 70%.
Laila Pence of Pence Wealth Management told Bloomberg TV: “We think the Delta variant is not going to stop the recovery, it’s just going to delay it.
“The Federal Reserve is going to live with a lot more inflation. They don’t want to derail recovery.”
In early trade, Hong Kong led gains as it jumped more than 1% though investors continue to fret over China’s crackdown on a range of sectors including tech, private tuition and property.
There is a fear that gaming firms could be next after a state-run media article described online games as “spiritual opium”.
Tencent, which has been hammered by the latest government moves, rose more than 2% on bargain buying though it is still down over 20% since the start of last month.
Alibaba, another firm caught in the regulatory sweep, slipped slightly after announcing that revenues fell short of forecasts for the first time in two years.
Shanghai, Sydney, Seoul, Singapore, Taipei, Wellington, Manila and Jakarta all rose, though Tokyo went into the break slightly lower. – AFP, August 4, 2021
