Breaking News
Investing Pro 0
Final hours: unlock premium data with Claim 60% OFF

Some Asia Markets Moving Higher; So Is All The Bad News Priced In?

By MarketPulse (Jeffrey Halley)Market OverviewFeb 25, 2020 18:57
au.investing.com/analysis/some-asia-markets-moving-higher-so-is-all-the-bad-news-priced-in-200433622
Some Asia Markets Moving Higher; So Is All The Bad News Priced In?
By MarketPulse (Jeffrey Halley)   |  Feb 25, 2020 18:57
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
Gold
-1.25%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
CSI300
+0.24%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
SSEC
+0.11%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
STI
+1.19%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
KS11
+1.03%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
KLSE
-0.06%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

Unless you were living on Mars—and in these days of connectivity that’s no excuse—you could not have missed the carnage that swept across financial markets overnight, driven by potential coronavirus pandemic fears. Equity, commodity and energy prices were crushed, bond yields sank, the U.S. dollar, Swiss franc and Japanese yen all rose, in a classic pattern of 'sell everything and move into cash.'

However, this morning, Asia is refusing to follow yesterday’s panic-driven sell-everything script. The S&P 500 fell by 3.55% overnight, but this morning, the aftermarket S&P 500 e-mini futures have risen by nearly 1.0%. Additionally, some regional stock markets are actually in the green today, notably South Korea and Singapore, and the home to Asia’s Game of Thrones, Malaysia, (more on this later).

The Nikkei has been punished this morning, but it was closed yesterday and is thus only playing catch-up to Asia’s sell-off yesterday. Indeed, for once the tail has wagged the dog, with Asia’s sell-off yesterday, leading the coronavirus sell-offs that followed across the globe. To be sure, the bounce in the e-mini futures this morning has lent some support to regional markets.

So has all the bad news regarding the potential coronavirus pandemic been priced into the markets for now? Gold would suggest so, as after jumping to $1689.00 an ounce early yesterday morning, it spent the day sliding all the way back to $1660.00 an ounce. The answer is almost certainly no. Gold leapt on one of the highest volumes, yet lowest liquidity periods of the week, the Monday opening of the futures in Asia. Chasing that price action, even with a global emergency, rarely yields a positive intraday trading result on a Monday. However, although gold did slide throughout the day, it still finished higher than where it was on Friday.

I would argue, the bounce in the S&P e-mini futures is entirely driven by fast money profit-taking in after-hours trading and not a change in sentiment. If you have faith in the health authorities of Iran and Italy and Afghanistan to control their cases of coronavirus, then, by all means, go bargain hunting. What is becoming clearer by the hour, is the disruption from coronavirus to business globally, in the form of supply chain bottlenecks and falling sales. Against that backdrop, any short-term rallies in asset markets are likely to be just that...short.

Malaysia, never afraid to tread its own path, appears to have decided to get all its bad news out at once. Yesterday, Prime Minister Mahathir resigned, only to be immediately re-appointed by the Malaysian King as the interim-PM of the country until a new government is formed. The anti-corruption coalition that won power over UMNO appears to be fracturing, with various factions of the ruling coalition meeting with UMNO over the weekend. That seems to have prompted Dr Mahathir’s resignation, refusing to countenance working with the severely tainted previous governing party.

Government jostling of positions will likely dictate whether Malaysia heads for a period of instability and a trip to the naughty corner from international investors. Certainly, the people did not vote for UMNO, or UMNO would have won the election. Quid pro quo, should UMNO be restored to power by a new coalition, then logically new elections should follow. Being Malaysia off course, things won’t be so simple.

The evolving situation in Malaysia has the potential to add further instability to both the country and the region. It comes at a time when Malaysia itself is still grappling with the financial potholes left by the previous rent-seeking administration, slow domestic growth, and a potential shock to its major export markets from coronavirus. Malaysia has chosen this moment to decide whether it goes back to the future, or to the actual future. I’ll not try to predict that outcome, but in the short-term, it is unlikely to be positive for either Malaysian equities or the Malaysian ringgit.

The data calendar is sparse in Asia today with today's highlights being German GDP and the U.S. Conference Board's Consumer Confidence. The latter will be more pertinent as it's for February, and thus, marks the first of a procession of data globally over the next week that covers the coronavirus outbreak. A slight rise is expected to 132.0 from 131.6 previously. A surprise fall could mean a normally tier-2 data item twists the knife into asset markets.

Equities

Asia led the way yesterday, with its Monday sell-off infecting European and North American markets, with Wall Street enduring its worst day by far in recent times. The S&P 500 collapsed 3.35%, the NASDAQ by 3.76% and the Dow Jones by 3.56%. The spread of coronavirus internationally saw the hard medicine of reality force-fed to the V-shaped recovery epidemiologists of Wall Street.

Today has been a more mixed bag. The Nikkei, having been closed yesterday, has played catch-up, tanking 3.30% this morning. China’s Shanghai Composite has fallen 1.30%, and the CSI 300 is 0.40% lower. The resource-centric Australian ASX All Ords continued its recent falls, easing 1.80% today.

Elsewhere, however, regional Asian stock markets are enjoying modest bounces, assisted by profit-taking in the S&P 500 e-mini futures, which have risen 0.80% this morning. The South Korean KOSPI has climbed 0.45%, the Straits Times by 0.80% and even Kuala Lumpur has climbed 0.65%. The latter is more surprising given the political turmoil there. Hong Kong, having rallied initially, has now fallen by 0.35%, ahead of tomorrow’s official 2020 budget.

The gains on regional Asian markets look temporary though, with all of the Asia Pacific heavyweights in the red. The gains have been driven by short-term speculative flows coat-tailing the S&P futures bounce. As such, the rallies seen by the S&P futures and local stock markets should be regarded as dead cat bounces, and not the coming of the dawn.

Currencies

U.S. Treasury yields collapsed overnight, as investors piled into safety as the stock market was routed. Although haven currencies such as the yen and Swiss franc made gains against the greenback, the U.S. dollar finished mostly stronger, boosted by haven flows into the U.S. bond market.

The U.S. dollar continued to grind higher against emerging markets in North American trade and an escalation in coronavirus internationally, will see that pressure accelerate if anything. After the moves higher by the U.S. Dollar yesterday, some profit-taking is evident against regional Asian currencies this morning. The SGD, MYR and IDR are posting small gains. Whether the reprieve becomes more concrete is entirely in the hands of factors outside of the ability of countries globally to control the spread of coronavirus.

With the Bank of Indonesia officially intervening in currency markets yesterday, Bank Negara Malaysia may find itself having to do the same to support the ringgit, should the political situation deteriorate.

Oil

The uncontrolled spill in oil prices continued overnight as the spread of coronavirus internationally induced panic selling. Brent crude fell to nearly $55.00 a barrel yesterday before a comeback that still saw it finish lower by 4.0% at $56.15 a barrel. WTI touched $50.50 a barrel, before climbing back to $51.30 a barrel, a loss of 3.80% for the session. Both contracts have chiselled out small gains this morning in Asia as mild profit-taking appeared.

Brent has climbed to $56.50 a barrel and WTI to $51.55 a barrel. Like equities, the bounces are minuscule in comparison to the week's falls and look corrective in nature. Critical levels remain $53.00 a barrel on Brent crude and $50.00 a barrel for WTI.

Although both levels were seen in early February, a return to those regions now looks very likely and this time, will almost certainly test the mettle of OPEC+. Stabilization measures are virtually guaranteed from the group this time around, although their effectiveness may be debated.

Gold

Gold touched multi-year highs around $1688.00 an ounce in panic buying at the Asian open yesterday. The yellow metal then spent the rest of the day in retreat, finishing at $1659.00 an ounce, for a still respectable, one per cent gain on the day.

Highlighting the perils of getting involved in the futures openings in Asia, gold spiked lower to $1644.00 an ounce, before immediately returning to the $1657.00 regions this morning. Algorithmic buying and margin stop-outs likely spurred much as yesterday’s jump; this morning looks like a good old-fashioned whipsaw of those flows.

As the gold dust settles after the initial flurry, gold has retreated slightly to $1557.00 an ounce as the S&P e-mini futures have risen this morning. Given the weight of the asset market sell-off overnight though, gold’s price action after one strips out the noise, has been somewhat disappointing.

If ever there was a day for a serious test of $1700.00 an ounce, it was yesterday. The fact that gold settled near the lower end of its broader $1650.00 to $1700.00 trading range implies that gold’s upward momentum may have waned for now. Having effectively led the “coronavirus hedge” by a few days, it appears that gold is now set for a period of consolidation.

Original Post

Some Asia Markets Moving Higher; So Is All The Bad News Priced In?
 

Related Articles

Some Asia Markets Moving Higher; So Is All The Bad News Priced In?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Grant trade
Grant trade Feb 26, 2020 7:50
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks for the succinct overview.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email