Asian equities post modest gains

Moderna boosts Wall Street but Asia more subdued

The Moderna vaccine news lifted Wall Street overnight, with the S&P 500 rising 1.17%, the Nasdaq rising 0.80%, and the cyclical-heavy Dow Jones jumping 1.62%. In Asia though, the reception has been somewhat more subdued, notably amongst the more tech-heavy North Asia bourses. The Nikkei 225 and Kospi are up 0.25%. In China, the Shanghai Composite and CSI 300 have eased by 0.25% as the yuan was fixed at a 2.5-year high this morning.

ASEAN markets, being more heavily cyclical, have outperformed today. Bangkok is 0.70% higher, with Jakarta up 0.90%, and Manila 0.25% higher. Singapore had rallied by 1.0%, but Kuala Lumpur is flat, as its surgical glove sector weighs on the local index. Australian markets reopened today but have only posted modest gains with the Covid-19 outbreak in South Australia weighing on sentiment. The ASX 200 has crept 0.25% higher, with the All Ordinaries eking out a 0.15% gain. Europe should also be poised for a positive open, although the Covid-19 situation in their here and now will temper exuberance.

The Moderna vaccine update triggered another spurt of buying flow into super spreader sectors such as airlines. With Covid-19’s biblical comeback crashing over Iran, Russia, all of Europe, the US and Mexico, and others I’m sure I’ve missed, we will all still be working from home for some time to come, vaccine or no vaccine.

The continual procession of Covid-19 lockdown news from key Northern Hemisphere markets appears to be muting vaccine exuberance this morning. Having priced in two years of growth in two hours after the Pfizer announcement, momentum in the rotation trade has also reduced. Although vaccines will change the game in 2021, supporting ASEAN markets in particular, until we have a better picture of when social mobility will return, we are unlikely to see the fireworks of the post-Pfizer price action.

That said, equities will remain solidly supported on any short-term dips as we advance, on a combination of monetary policy and vaccine-led recovery.

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