• York Investment & Finance

Global Markets Overview: Asia

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

SoftBank posted its quarterly results and Kuaishou’s IPO, on Friday, was the largest in the tech industry since Uber. Meanwhile, Biden continues a hawkish outlook on China.

On Monday, the Nikkei closed higher by 2.12%, reaching its highest level since 1990 [1]. The rally was fuelled by optimism of Biden’s $1.9 trillion stimulus package and SoftBank’s earnings. The Japanese multinational conglomerate saw its operating income in last quarter (ended Dec. 31) rise 3.6% to 252 billion yen, whilst revenue jumped 11% to 1.38 trillion yen [2]. The soar in earnings can be attributed to Uber and DoorDash, which SoftBank has major stakes in, as the pandemic boosted demand for remote work services [3].

Aside from the optimism surrounding the US stimulus package, the gains in the CSI 300 and Hang Seng, which rose 1.1% and 2.9% respectively, have mainly been impacted by Kuaishou’s IPO [4]. The flotation of Kuaishou, a short video company, has been the largest in the tech industry since Uber in 2019, raising $5.4bn in the first day of trading and the share price closed up 160% higher [5]. While in the long run, the app will probably face threats from fast-growing, smaller competitors; in the short run, interest from retail investors will likely continue to increase as has been seen in the subscription of Kuaishou shares [6].

Kuaishou’s IPO highlights that despite the Trump administration’s attempt to decouple with China, American investment has continued to pour into the country. Fidelity and BlackRock are two American investors that have made significant investments in the Chinese IPO [7]. It is likely that American investment into China will increase, despite Biden’s equally hawkish outlook. Although the new US administration will have a tough stance on China, Biden will be likely to adopt the ‘international rules of the road’ [8]. Trump's trade policies have proven to be more detrimental to the US than China, as last year China overtook the US and became the largest recipient of FDI for the first time [9]. While the Biden administration is prepared to cooperate on issues that impact the US such as Covid-19 and climate change, it will not overlook China’s violations of human rights and threat over Taiwan. The new Secretary of State, Anthony Blinken has highlighted China’s oppression of Uighur Muslims as ‘genocide’ and the President invited Hsiao Bi-khim, the first Taiwanese representative, to the inauguration [10].

Shortly after, the US State Department warned China to stop trying to intimidate Taiwan after Chinese fighter jets and bombers entered Taiwan’s air defence zone and simulated attacks on a nearby US aircraft carrier [11]. The recent incidents show the ‘extreme competition’ that will take place between the two powers over the upcoming years [12].

This article was first published in the University of York Investment and Finance Society's Global Market Telegraph (GMT) Edition 2 in late February 2021.

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Reference list:

[1] https://www.forexlive.com/news/!/nikkei-225-closes-higher-by-212-at-2938850-20210208

[2] https://www.bloomberg.com/news/articles/2021-02-04/softbank-s-mobile-unit-raises-profit-goal-citing-telework-demand

[3] https://www.ft.com/content/c2f107a7-734d-450a-bf46-eb68a65ceaf4

[4] https://www.marketpulse.com/20210205/stimulus-sends-asian-equities-higher/

[5] https://www.ft.com/content/05686da9-60f8-4a3a-a5c5-95155bd01ffe

[6] https://www.ft.com/content/4607a7c0-ae7e-456e-901b-1d0e924b8a12

[7] https://www.scmp.com/business/companies/article/3118983/kuaishous-us10-billion-ipo-attracts-blackrock-abu-dhabi-canadian

[8] https://thehill.com/policy/international/538081-biden-takes-cautious-tack-on-china-as-tensions-simmer

[9] https://www.scmp.com/economy/china-economy/article/3119069/china-largest-recipient-fdi-2020-even-global-foreign-direct

[10] https://www.ft.com/content/1f5b1cde-2164-406c-8535-368a624cca62

[11] https://www.ft.com/content/e6f6230c-b709-4b3d-b9a2-951516e52360

[12] https://www.cnbc.com/2021/02/07/biden-will-compete-with-china-but-wont-take-trump-approach.html


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