Asian equities mixed today

Wall street upbeat, but China markets down

Asian equity markets are mostly higher across the region after a mostly upbeat session from Wall Street overnight. Slightly lower US yields and expectations of a larger than expected Biden-led stimulus package have boosted sentiment along with impressive China trade data. It is ironic then that the region’s laggard is mainland China where the Shanghai Composite has fallen 0.75%, and the CSI 300 has retreated 1.0%. Especially so after the US Treasury intervened to prevent a US delisting by China tech giants Alibaba, Tencent and Baidu.

It would appear that China’s retail investors (who account for most equity market turnover) are increasingly nervous about stretched valuations and are reducing exposure at these levels. The expanded Covid-19 restrictions in parts of China may also be eroding sentiment. Given the positive outlook seen elsewhere globally, I am looking at today’s falls in China as a temporary one.

US major index futures have risen modestly today, by between 0.20% and 0.30%. In Japan, the Nikkei 225 has jumped by 1.50% while the Kospi has only managed to eke out a 0.30% gain. After the US Treasury intervention, Hong Kong has climbed 0.45% as the dual-listed China tech giants rise locally.

Singapore and Kuala Lumpur are 0.40% higher, although Jakarta has slipped slightly by 0.20%. In Australia, the All Ordinaries has climbed 0.50%, with the ASX 200 rising 0.35%

Despite the retreat in China, the overall sentiment in equity markets remains positive. President-elect Biden’s potentially two billion dollar stimulus package should anchor gains, even if getting it through the Senate would be a monumental task. That is likely to be a story for the end of the month.

Another boost for markets could come from Johnson and Johnson, which have released preliminary data from their phase one and two trials for their Covid-19 vaccine. The data from the trials have been encouraging, with initial phase three data due at the end of the month. The J&J vaccine is a potential game-changer, as it is a one-shot vaccine and does not require special cold storage.

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