Asian equities in calm waters

Asian equities have a cautious start

Although Wall Street finished the week on a positive note, Asian equity markets are mostly slightly negative to start the week. Regional markets appear content to wait for a flood of tier-1 data late this week, with Covid-19 restrictions across the region also weighing heavily.

On Friday, growth trumped value after progress with the US infrastructure plans, and US banks passing the Federal Reserve stress tests leading to an outperformance by the Dow Jones and S&P 500. The S&P 500 rose 0.33% while the Nasdaq finished almost unchanged, lower by just 0.06%. In contrast, the Down Jones raced 0.71% higher. In Asia, futures on all three indexes have edged 0.10% higher.

Asian markets are mostly slightly lower. The Nikkei 225 and Kospi are down 0.10%. In mainland China, the Shanghai Composite is 0.05% lower, while the CSI 300 has edged 0.10% higher. With the Communist Party’s 100th birthday this week, I expect China’s “national team” to be on the bid “smoothing” as equity market sentiment heads south. Bad weather has cancelled the morning session in Hong Kong, although it will reopen this afternoon.

Regional markets are mixed to negative. Singapore has climbed 0.13% on M&A and trade agreement talks with the UK, while Taipei has climbed 0.30%. Kuala Lumpur has tumbled by 1.10% as the national Covid-19 lockdown was extended once again. The escalating virus situation is weighing heavily on Jakarta and Bangkok as well, down 0.80% and 0.25% respectively. In Australia, escalating restrictions in New South Wales and the Northern Territories sees the ASX 200 down 0.15%, while the All Ordinaries is unchanged.

The subdued start to the Asian week is likely to continue until the middle of the week when the data calendar accelerates. The evolving virus situation across APAC will start to weigh on any gains if it deteriorates increasingly. Europe is in a different place on the virus and is likely to shrug on Asia’s woes and post a modestly positive start to the week.

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