Mixed start for Asian equities

China equities markets slide after PBOC withdraws liquidity

US equities markets had another sideways day on Friday, with all three major indexes closing near to unchanged. Except for China, most of Asia has opened cautiously higher with global recovery sentiment, notably reflected in base metals prices, fuelling the bullish tone.

Mainland China markets are enduring a torrid day after the PBOC left interest rates unchanged and withdrew liquidity vis today’s repo. The main driver though appears to be a new ruling dealing another blow to Ant Financial. The government announcing new rules limiting the amount of co-lending banks can do with digital lenders. That has pushed the Shanghai Composite 0.10% lower, but the more tech-heavy CSI 300 has retreated sharply by 1.50%. The mainboard Shanghai 50, heavy with banks, has fallen 1.85%. Hong Kong, meanwhile, has managed to remain steady at 0.20%.

The Nikkei 225 has risen 0.60% this morning, with the Kospi is unchanged. Singapore is 0.15% higher, with Kuala Lumpur down 0.15%, Jakarta 0.85% higher and Bangkok 0.20% lower. Australian markets are also in neutral territory, the ASX 200 falling 0.20%, while the All Ordinaries has risen 0.05%. Futures on the S&P 500, Nasdaq and Dow Jones are all around 0.15% lower.

Taking a look ahead at the week, US Personal Consumption Expenditure data is likely to show a large jump given the Retail Sales outperformance last week. US second read GDP for Q4 of 2020 is also likely to impress, a trend that will accelerate as the US starts to reopen. It will be the Powell testimony though that will have the most weighting for markets.

The mixed fortunes tell a story of wavering bullish sentiment as inflation fears rise, and most likely, waning momentum after an impressive first seven weeks of the year. At this stage, the price action looks corrective and I expect equities to find a wall of buyers on any material dips.

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