• York Investment & Finance

Global Markets Overview: Asia

Updated: Sep 11, 2020

From 13 to 27 July 2020

Despite China’s GDP rising 11.5% in Q2 (quarter on quarter), Friday saw Shanghai’s CSI 300 fall by 5%, the worst in five months following disappointing retail sales [i] for the second quarter [ii]. At the same time, Korea’s Kospi rallied 0.84%, suspected to be from abundant market liquidity and expectations rising for a Covid-19 vaccine after a clinical trial led to the successful formation of an antibody [iii]. The Nikkei 225, however, ended the week 0.25% lower [iv], as new coronavirus cases emerged in Tokyo.

The Nikkei may continue to see a decline despite the Japan’s government effort to push the ‘Go To Travel’ campaign in hopes to revive the Japanese 20.5 trn [v] tourist industry with a cash injection of $10bn to subsidise travel costs, including on airfares and discounts for regional businesses. Since 286 new coronavirus cases were confirmed in Tokyo on Thursday, the government has excluded the capital from the ‘Go To Travel’ campaign to prevent further spread, however, many local leaders in other regions still believe it is too soon to open up tourism [vi]. The aim is to promote a safe way of travel, as well as open up the economy [vii], but the fear is that the new campaign may lead to another lockdown. The past two quarters have seen Japan fall into a recession but a total lockdown could wipe out the slow economic recovery it has made and lead to another quarter of negative growth [viii]

On the Asian technology stock scene, the recent move by the UK to follow the US to ban Huawei, has led to China vowing to retaliate economically [ix]. This further adds tension to the previous strain in relations after the UK government granted UK citizenship for up to 3 million Hong Kong residents after the imposition of the national security law [x] . Moreover, TikTok (the video sharing app) which has been banned in India and has additionally received imminent threats to be banned in the US, has left even more uncertainties regarding the Chinese hi-tech sector. As TikTok is reversing its decision to set up a HQ in the UK, it is not implausible to suggest that Chinese companies, particularly state owned enterprises, may rethink and claw back their investments in the UK [xi]

By Chau Tonnu - Analyst at the York IFS Global Market Telegraph

This article was first published in University of York Investment and Finance Society's Global Market Telegraph (GMT) Edition 3.1 in late July 2020.

Reference List:

[i] https://www.interest.co.nz/currencies/106092/mild-risk-session-overnight-equities-lower-usd-stronger-us-retail-sales-better

[ii] https://www.chinainternetwatch.com/30910/retail-sales/

[iii] http://www.businesskorea.co.kr/news/articleView.html?idxno=49052

[iv] https://www.marketpulse.com/20200717/asian-stocks-quiet-eu-summit-looms/

[v] https://www.statista.com/topics/4875/travel-and-tourism-industry-in-japan/

[vi] https://www.japantimes.co.jp/news/2020/07/16/national/japans-go-to-travel-campaign-in-doubt/

[vii] https://www.japantimes.co.jp/news/2020/07/15/national/japan-go-to-travel-campaign-coronavirus/#.XxQ77fhKgnM

[viii] https://www.bbc.co.uk/news/business-52570721

[ix] https://www.cnbc.com/2020/07/15/huawei-uk-ban-china-state-media-urges-retaliation-against- britain.html

[x] https://www.businessinsider.com/china-painful-and-public-retaliation-uk-huawei-hong-kong-2020-7?r=US&IR=T

[xi] https://www.globaltimes.cn/content/1194795.shtml

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