Asia jumps on Evergrande hopes

Evergrande shares soar

Asian equity markets are having a good day as perceptions of reducing Evergrande risks lift sentiment. Evergrande’s stock price has rocketed over 20.0% higher in Hong Kong today despite any resolution probably meaning equity owners get wiped out. Much the same sentiment seemed to sweep New York markets overnight as it quickly became clear that the US dollar would be the Fed taper pressure valve, and not US bonds or stocks. That allowed Wall Street to seize the day on what it perceived as diminishing Evergrande tail risks.

The S&P 500 jumped by 0.95%, the Nasdaq leapt 1.02% higher and the Dow Jones powered to a 1.01% gain. Futures on all three have continued rallying in Asia, climbing by around 0.20%. Japan is on holiday today, but South Korea has returned with the Kospi playing catchup for the past three sessions, easing by 0.40%.

Elsewhere though it is Thunderbirds Are Go as Asian markets follow Wall Street and hitch a ride on Evergrande hopes. China’s Shanghai Composite has risen 0.70% with the CSI 300 climbing by 0.60%. Hong Kong is 0.65% higher thanks to the buying frenzy in Evergrande stock. Singapore has jumped 0.85% higher with Taipei gaining 0.90% and Kuala Lumpur rising by 0.50%. Manila is 1.05% higher ahead of a BSP decision expected to leave rates at record lows, while Bangkok is just 0.20% higher. Australian markets are rallying strongly as well, boosted by a continuing rally in commodities prices. The ASX 200 is 1.0% higher while the All Ordinaries has rallied by 1.15%.

European markets enjoyed a strong session yesterday thanks to Wall Street, and a Fed taper is probably good news for them in the medium term as the euro is likely to fall as euro-rates remain low forever. With Asia also climbing aboard the rally today, European equities should enjoy another strong start. My one caveat on all the joy in equities today is that much of it seems to be built on diminishing Evergrande tail-risks. I would argue that all it will take is one nasty headline to emerge on that front and the entire day’s rally could quickly evaporate.

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