Asia rallies as Wall Street climbs

Investors cheer Yellen appointment, transition process

Asia Pacific markets are a sea of green today after Wall Street leapt on the global recovery trade, powered by Yellen’s appointment, transition permissions and vaccine progress. Much noise was made about the Dow Jones breaking 30,000, but it is just a number, and all three major indices clocked up impressive gains. The S&P 500 rose 1.62%, the Nasdaq rose 1.31%, and the Dow Jones rose 1.54% to close at 30,045.84.

In Asia, the Nikkei 225, full of legacy industry companies, continues to outperform. Powered by the rotation into cyclical stocks and the retail herd, the Nikkei 225 has risen 1.45% today. The gains across the rest of Asia are more modest. The Kospi has risen 0.55%, and in China, the Shanghai Composite and CSI 300 has gained 0.20%. After making early gains, both China indices have retreated, with nagging concerns over corporate bond defaults and US blacklists of local companies muting sentiment.

The Hang Seng, in contrast, loaded with cyclical stocks such as property, leisure and an airline or two, has outperformed, rising 1.25% today. Singapore, by contrast, has only managed a 0.30% gain after outperforming in recent days. Kuala Lumpur and Jakarta have gained 0.90%, while in Australia, the All Ordinaries and ASX 200 have gained 0.75%.

South-East Asia, Hong Kong, Japan and Australia, heavy in cyclical industries, property, leisure, and banks should continue to outperform the more tech-centric new economy markets of China, South Korea and Taiwan in this environment. That is not to say that the latter are near their tops, far from it. More the case that the former will likely rise faster than the latter, as an orderly transition of power in the US, and its return to international engagement, and Covid-19 vaccines increase the pace of investor rotation. Ultra-loose monetary policy across the world will ensure that no matter where one invests, the end of the tunnel will remain in sight.

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