Wall Street climbs, Asia follows

Asian equities rise with Wall Street

The vaccine-powered global recovery, Biden stimulus, buy everything mania continued on Wall Street overnight, which powered to fresh record highs. The S&P 500 rose 0.74%, the Nasdaq leapt 0.95%, and the Dow Jones gained 0.76%. US futures are almost unchanged in Asia, meaning that the region was happy to hitch its wagon Wall Street’s momentum, albeit modestly ahead of the Lunar New Year break.

The Nikkei 225 is up only 0.05%, with the Kospi moving 0.50% higher. By contrast, mainland China is having a strong session. With the Shanghai and Shenzhen pipes to Hong Kong closed yesterday for Chinese New Year, those funds appear to have flowed back up to mainland markets. That has pushed the Shanghai Composite up 1.20%, with the CSI 300 jumping 1.45%. By contrast, the Hang Seng has risen only 0.45%.

Around Asia, Singapore has edged 0.15% higher, with Jakarta climbing 0.45%. Kuala Lumpur, Taipei and Bangkok have advanced by over 0.60%. By contrast, Australia has been hit with a wave of profit-taking, with banks and large retailers dragging the indexes lower. The ASX 200 is down 0.70%, with the All Ordinaries down 0.60%.

The buy everything trade is back with a vengeance for now, and I shall not argue with the speculative momentum. Only Chinese and US inflation numbers released tomorrow could distract markets. Unless US inflation surprises to the upside, the distraction will only be temporary. We are all back to stimulus and vaccine watching.

With most of Asia shutting down for Lunar New Year, starting with Taiwan and Vietnam tomorrow, liquidity will steadily erode in Asia, where trading appears muted already today. That will leave those markets that are still open, vulnerable to headline-driven, temporary volatility spikes. I also have a nagging fear that after the bitcoin mania overnight, retail funds may be pivoting to chase that market. The falls on Australian markets, in particular, are likely to be temporary.

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