Asian equities err to the side of caution
US equities fell overnight as conflicting signals on recoveries, employment and QE tapering saw investors err to the side of caution and take exposure off the table. The S&P 500 fell 0.12%, the Nasdaq retreated by 0.56%, and the Dow Jones edged 0.20% lower. The negativity continues in Asia, with futures on all three indices down 0.20%.
That sense of caution has flowed into Asia today, which is in the red. The further clampdown on Tencent and NetEase is further dampening the mood on the mainland and Hong Kong. I continue to believe that buying the dip in China equities is only for the wildly optimistic or the very nimble.
Japan has finally paused for breath following the impressive Suga-rush resignation stimulus hope rally. The Nikkei 225 is 0.60% lower this morning but is still over 5.0% higher for the week. In South Korea, the Kospi is 1.05% lower, continuing a tough week with its high beta to the global recovery.
In China, the Tencent and NetEase news has dampened spirits and highlights that the government’s “shared prosperity” drive still has plenty of juice left in it. The Shanghai Composite is down just 0.15%, but the CSI 300 has fallen by 0.50%. Hong Kong, home to the listings of many China-tech juggernauts, including Tencent, is feeling the brunt, tumbling by 1.55%.
Singapore’s Straits Times has risen by 0.20% today, with sentiment perhaps buoyed by the arrival of the first flight from Germany under the quarantine-free scheme. After several days of conflicting virus advice from various Singapore government departments (very un-Singapore-like, I can assure you), there is nothing like a light at the end of the tunnel to lift spirits.
Elsewhere, though, the picture is mixed. Kuala Lumpur has fallen 0.75% ahead of the BNM policy decision, while Bangkok is unchanged, while Jakarta and Taipei have climbed by 0.20%. With a high beta to the global recovery, Australian markets have taken fright over those fears overnight, led by resource companies. The ASX 200 has plunged by 1.65%, while the All Ordinaries has tumbled 1.50% lower.
The generally nervous performance by Asia, coming after a wary Wall Street session, is likely to see European equities open lower this afternoon, especially with an ECB policy meeting ahead. With many conflicting signals pushing investors both ways right now, it is unsurprising that many choose to move to the sidelines and wait for the fog to clear.
