• York Investment & Finance

Global Markets Overview: Asia

By Aryaman Merchant, Analyst at York IFS Global Market Telegraph

Markets rally high into the new year before falling again, Singapore gunning to become global SPAC hub, Jack Ma resurfaces after 3-month absence, Chinese tech giants fear CCP crackdown, M&A activity increases in 2020 despite pandemic.

The BSE Sensex continues its fall, losing over 2700 points (5.8%) over the week and currently at just over 47,400 points as of Wednesday, 27th January 2021.[1] The index rallied greatly for most of the month following Bharat Biotech’s vaccine news, reaching a record 50,000 points but optimism fell once again amid doubts over the vaccine’s effectiveness. The IMF published predictions of 11.5% growth over 2021 and 6.8% in 2022, which would make India the world’s only major economy to have double-digit growth in 2021.[2]

The Shanghai SSE Composite Index showcased strong growth heading into the new year, eventually levelling out after a 2-week rally. The index ended the 27th January 2021 up 0.11% from the previous day. Morgan Stanley’s research attributes this to a free liquidity dip as well as COVID concerns.[3]

The ASX 200 reached 11-month highs at 6,832 points on Monday, 25th January 2021, before falling down to 6,780 points on Wednesday, 27th January, down 0.76% from it’s peak. The peak came as the Therapeutic Goods Association approved the Pfizer/BioNTech vaccine for use in Australia.[4]

In Hong Kong, on the 25th of January the Hang Seng suffered a large daily loss, down by 1.6%.[5] The index continued to fall as people sold shares, fuelled by fear that the new year rally was excessive, ultimately falling 2.6% on Tuesday the 26th. The index has grown by almost 11% since new year, it’s best start since 1985.[6]

Singapore’s Straits Times Index is also forecast to grow by 10% to between 3,000 and 3,200 points by the end of 2021.[7] Contributing factors include recovery from the effects of the pandemic as well as the Regional Comprehensive Economic Partnership signed in late 2020.

Singapore also has plans in the pipeline to become a global hub for SPACs, or Special Purpose Acquisition Companies. Last year, SPACs became one of the hottest asset classes, raising a record $80bn. Companies favour SPACs over IPOs as they are less expensive and time consuming.

Chief Executive of SGX, Tan Boon Gin, said SPACs would benefit both local and regional capital markets through offering issuers a faster path to market and more certainty on pricing.[8]

After AliBaba founder Jack Ma’s criticism of the Chinese regulators’ “pawnshop” attitude in October last year, the Chinese government suspended Ant Group’s IPO to make it clear that no one, even Jack Ma, is bigger than the CCP. Following these events, Jack Ma mysteriously disappeared from the public eye, only reappearing three months later through a video released on the 10th of January. Many speculated he was disciplined by the CCP, given how much it looked “like a hostage video”, although nobody knows for sure of what happened to Ma while he was gone.[9] Antitrust scrutiny of Alibaba by Chinese regulators has led to Alibaba competitors Tencent Holdings Ltd., Meituan Dianping and JD.com Inc. to fear that the Communist Party’s crackdown will extend beyond Jack Ma’s empire. Along with Ma’s sudden disappearance, the move has revealed Beijing’s loss of patience with technology moguls, once hailed as the pillars of China’s economy.[10]

In terms of M&A activity, APAC had 2% growth month-on-month of total M&A activity in December 2020.

Sector-wide deal data shows that Utilities had the greatest year on year growth growth, with 28% more deals than in 2019, but also had the biggest decrease in year on year value. Materials and Healthcare grew by 22% and 17% respectively. In terms of deal value, Telecommunications surged by almost 300% year on year, with the total value of Energy deals rising 94% and IT by 86%. Overall, compared to 2019, 2020 showed an increase in the number of deals by 11% and a 43% increase in total deal value.[11]

This article was first published in University of York Investment and Finance Society's Global Market Telegraph (GMT) Edition 14.1 in early February 2021.

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[1] https://www.smh.com.au/business/markets/asx-set-to-start-higher-commodities-slip-20210125-p56wj7.html [2] https://www.scmp.com/business/markets/article/3118761/hong-kong-stocks-slump-after-10-cent-rally-above-30000-level [3] https://www.scmp.com/business/markets/article/3119234/hong-kong-stocks-slide-21-month-high-mainland-funds-top-picks [4] https://www.businesstimes.com.sg/stocks/stock-watch-2020-stars-and-laggards-likely-to-switch-sides-in-2021 [5] https://www.ft.com/content/18d51d14-4f2d-4a28-853d-b2eaf3b0eb00 [6] https://www.theguardian.com/business/2021/jan/23/the-strange-case-of-alibabas-jack-ma-and-his-three-month-vanishing-act [7] https://www.marketwatch.com/investing/index/1?countrycode=in&mod=home-page [8] https://economictimes.indiatimes.com/news/economy/indicators/india-seen-as-fastest-growing-economy-in-fy22-imf/articleshow/80467250.cms [9] https://economictimes.indiatimes.com/markets/stocks/news/china-composite-stock-index-slips-blue-chips-rise-as-global-rally-pauses/articleshow/80403354.cms

[10] https://www.japantimes.co.jp/news/2021/01/10/business/xi-jinping-jack-ma-china/ [11] https://pages.marketintelligence.spglobal.com/rs/565-BDO-100/images/MI-Research-APAC-Markets-Monthly-January-2021.pdf


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