China equities outperform on yuan fall

China equities boosted by easing of investment rules

In an otherwise quiet start to the week, Chinese equities have exploded higher this morning. Mainland stocks were boosted by the easing of foreign investment restrictions in Shenzhen tech companies. Mostly, the rally appears to be driven by the change in policy by the PBOC over the weekend, making it easier to sell yuan. The yuan’s fall today has been mirrored by a jump in the Shanghai Composite and CSI 300, which are both 1.85% higher. Hong Kong has coat-tailed the rally, rising 1.50% today.

The rest of Asia is more subdued after the US ended the week positively on fiscal stimulus hopes. Wary of US presidential tweet risk, Asia/Pacific markets are mostly slightly in the green. The exception is Japan, where a strengthening yen, poor new machinery orders, and North Korea’s unveiling of new weaponry over the weekend have pushed the Nikkei 0.45% lower.

In Asia this week, uncertainty has returned to Malaysian politics, (did it ever go away?), with opposition leader Anwar Ibrahim to meet with the Malaysian King tomorrow, to prove that he has a sufficient majority in parliament. That possibility, and the range of possible responses available to the King, will mute sentiment in Malaysia for the first part of the week at least. Malaysia has sunk 0.95% on political uncertainty, while Australia’s leading indices are flat on the day. Elsewhere the Kospi has risen 0.50%, Singapore is up 0.40% with Jakarta up 0.70% after Jakarta’s Covid-19 restrictions were eased.

Overall, the picture, China aside, is one of Asia content to follow New York’s move higher cautiously. That is in keeping with the pattern of trading last week where Asia, wary of headline risk, followed but didn’t fully commit to the exuberance of US markets. That pattern is likely to continue this week.

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