Stimulus and China fire up Asian stocks

China’s growth lifts Asian equities

With Pelosi and Mnuchin still talking over the weekend, US equity futures had a strong start to after-market trading this morning. All three major indices futures rising over 0.50%. Another set of impressive Chinese data has also lifted spirits and combined, has lifted Asian equity markets to a strong start to the week.

China’s data has started the week on a positive note, despite being a mixed bag. GDP underperformed slightly, rising 4.90% YoY for Q3, with GDP growth increasing 2.70% QoQ for Q3. Industrial Production outperformed, rising 6.90% YoY for September versus 5.80% expected; but Retail Sales took center stage. Retail Sales climbed by 3.30% YoY for September, much higher than the street’s consensus of 1.80%. China’s GDP growth has become the envy of the rest of the world. At the same time, industrial production and retail sales continue to confirm China’s rapid economic recovery and its role as the engine of post-Covid growth.

The Nikkei 225 has risen 1.10% despite underwhelming Japan data, with the Kospi up 0.80%. Mainland China equities have shrugged off new export restriction laws, focussing instead on the China data releases. The Shanghai Composite and CSI 300 have risen 0.50%, with the Hang Seng up 0.80%, with Ant Financial’s IPO approval apparently imminent.

Singapore and Malaysian markets have risen 0.60%, with Jakarta up 0.40% and Taiwan 1.05% higher. The eternal optimists down-under have been further boosted by hopes of an RBA rate cut in November and the easing of Covid-19 restrictions in New South Wales and Victoria. Australia’s All Ordinaries and ASX 200 climbing 1.0% today.

We expect equity markets to maintain their positive tone in Asia, although Europe, with its own risks very much to the fore, will be more sanguine. Looking ahead, increasing event risk, notably in US markets, looks like it will be ignored entirely. Wall Street is betting the house on some sort of US stimulus package. Depending on how the moving parts of the week play out, this week could denote “peak-FOMO” for equity markets for a while.

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