• York Investment & Finance

Global Markets Overview: Asia

Updated: Sep 11, 2020

From 27 July to 10 August 2020

The Hang Seng Index fell by 0.7% on Monday following news of a global resurgence in Covid-19 cases and the fraying economic and political relationship with the US. HSBC’s 4.4% decline as well as the Hang Lung Properties decrease of 2.7% have also sunk the Hang Seng Index.[1] Meanwhile, the US dollar has continued its decline in value on the back of further stimulus measures and a flight of capital into gold, with the Japanese Yen’s depreciation against the dollar helping boost the Nikkei by 2.4% — ending six continuous sessions of losses. Despite the worst outbreak of Covid-19 since Wuhan, in the Xinjiang province,[2] the Chinese manufacturing industry and tech industry have continued to soar, allowing the economy to grow in the second quarter, increasing the Shanghai Composite by 1.6% on Monday.[3]

Chinese tech stocks have continued to rise, with the Star 50 index rallying at 7.4% on Monday whilst Shenzhen’s ChiNext rose by 2.6%. This comes after the US has demanded TikTok to divest its US operations out of fears that data from the app would be shared with the Chinese government. Chinese tech firms are expected to obtain more support from the government as the China and US economies continue to decouple,[4] after Xi Jinping announced he would push for reforms to stimulate domestic demand in the economy. “Investors hold the belief that whatever sector the US bans, China will step up support in that area to push for greater development at home,” said Zhang Gang, a strategist with Central China Securities Co.[5] However, with the Trump administrations’ threat to target more Chinese tech companies[6] (such as Tencent, the parent company of WeChat), losing a significant number of American users (of which WeChat has 19m[7]) will take a toll on the share price of the apps and consequently the Star 50 index.

With the number of Covid-19 cases rising in the US and uncertainty over the November Presidential Elections, combined with the Federal Reserve’s monetary easing, the price of gold surged past $2,000 on Tuesday with investors looking at gold as a safe and stable asset. In Asia, gold prices also hit a new record of $2,031.14.[8] Investors suspect that the value will continue to grow, with expectations that inflation will soar once the pandemic is over. Bank of America analysts also believe that the US-China tensions mean the price of gold could reach $3,000 in the next 18 months.[9]

By Chau Tonnu - Analyst at York IFS Global Market Telegraph

This article was first published in University of York Investment and Finance Society's Global Market Telegraph (GMT) Edition 4.1 in early August 2020.

Reference list: [1] https://www.scmp.com/business/markets/article/3095742/hong-kong-stocks-slip-mainland-equities-add-best-gain-17-months [2] https://www.ft.com/content/09464ad1-e377-4a2e-9177-dca1be9b1aec [3] https://www.ft.com/content/74ae5a59-4020-48ad-a257-731b36a90bdb [4] https://www.ft.com/content/943ea0db-d4e6-414c-b953-6081058d5f2f [5] https://www.bloomberg.com/news/articles/2020-08-03/chinese-tech-stocks-soar-as-u-s-measures-spur-support-hopes [6] https://www.ft.com/content/e210c0d5-96ea-42d1-a645-32eeb5d7a37d [7] https://www.reuters.com/article/us-usa-tencent-holdings-wechat-ban/wechat-us-ban-cuts-off-users-link-to-families-in-china-idUSKCN253339#:~:text=In%20the%20past%20three%20months,according%20to%20analytics%20firms%20Apptopia [8] https://economictimes.indiatimes.com/markets/stocks/news/asia-markets-stutter-on-stimulus-struggles-china-us-tensions/articleshow/77363695.cms [9] https://www.ft.com/content/566dd8f7-7efe-45b6-8a44-b20f7f0f283e

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