HONG KONG, Aug 4 — Asian equities mostly rose today, in line with the recent volatility in global markets as optimism over the 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 US Federal Reserve over its ultra-loose monetary policies have also been unable to soothe fears that the outlook might not be as rosy as initially hoped, with sentiment changing day by day.
Still, in the morning today 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 the Delta virus variant remains the major stumbling block to the 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 into lockdown and officials have announced travel restrictions in some areas.
The country had brought domestic cases down to virtually zero after the disease 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 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 number two economy could tumble as a result of the tough new measures, putting downward pressure on prices.
However, analysts remained broadly optimistic that while Delta was a concern, it was 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 per cent, from 70 per cent.
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 the recovery.”
Hong Kong was among the main winners, 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 two per cent Wednesday on bargain-buying though it is still down more than 20 per cent since the start of last month.
Alibaba, another firm caught in the regulatory sweep, slipped slightly after announcing revenues fell short of forecasts for the first time in two years.
Hong Kong-listed casino firms including Galaxy Entertainment and Wynn Macau — already battered by the pandemic — tumbled around eight per cent after Macau ordered compulsory coronavirus testing for all residents as a family of four was found to be carrying the Delta variant, breaking the city’s record of more than 16 months virus-free.
Shanghai, Sydney, Seoul, Singapore, Taipei, Wellington, Manila, Mumbai, and Jakarta all rose, though Tokyo and Bangkok fell.
London, Paris, and Frankfurt were all up in the morning.
Key figures around 0810 GMT
Tokyo — Nikkei 225: DOWN 0.2 per cent at 27,584.08 (close)
Hong Kong — Hang Seng Index: UP 0.9 per cent at 26,426.55 (close)
Shanghai — Composite: UP 0.9 per cent at 3,477.22 (close)
London — FTSE 100: UP 0.3 per cent at 7,129.33
Dollar/yen: UP at 109.11 yen from 109.05 yen at 2045 GMT
Pound/dollar: UP at US$1.3942 from US$1.3916
Euro/dollar: UP at US$1.1871 from US$1.1868
Euro/pound: DOWN at 85.15 pence from 85.25 pence
West Texas Intermediate: DOWN 0.3 per cent at US$70.38 per barrel
Brent North Sea crude: DOWN 0.1 per cent at US$72.35 per barrel
New York — Dow: UP 0.8 per cent at 35,116.40 (close) — AFP
