HONG KONG: Most Asian equities and currencies rallied yesterday, building on the previous day’s advance as investors were cheered by a number of positive developments on trade, Hong Kong and Europe.
Markets were already on an upward trajectory after the leader of Hong Kong on Wednesday withdrew a controversial extradition bill that had sparked months of sometimes violent protests in the financial hub.
But the good news kept coming as the day wore on, with news that Italy had formed a new moderate, pro-European government, while British MPs moved closer to passing a law preventing a no-deal Brexit.
Then yesterday morning, China announced it would resume trade talks with the United States in Washington next month.
Chinese Vice Premier Liu He spoke to US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin by phone yesterday morning, the commerce ministry statement said, and agreed to “work together and take practical actions to create favourable conditions for consultations”.
The announcement provided a small sign of progress in the long-running row that has dragged on the global economy and stock markets. Asian equities were broadly in positive territory, tracking a healthy lead from Wall Street, where the S&P 500 moved to within touching distance of a new record high.
Tokyo ended more than two percent higher and Shanghai jumped one percent, with Sydney 0.9 percent up.
Seoul gained 0.8 percent, Singapore 0.3 percent, and Taipei and Wellington 0.9 percent apiece. Manila, Bangkok and Jakarta were also well in positive territory.
However, Hong Kong fell 0.6 percent in the afternoon. Having soared almost four percent Wednesday on the back of Chief Executive Carrie Lam’s shock decision to withdraw the bill, profit-takers moved in, while there was also some concern the offer will not be enough to avert more unrest.
Adding to the positive vibe were comments from China’s cabinet flagging a cut in the amount of cash banks must keep in reserve, a move aimed at releasing more cash into the stuttering economy.
“A full cut to banks’ reserve ratio is needed to make sure of effective financial support to economic growth, as the global economy slows and domestic consumption and investment face headwinds,” said Wen Bin, at China Minsheng Banking Corp. On currency markets, high-yielding, riskier assets were up across the board against the dollar, led by the Australian dollar and South Korean won.
The Chinese yuan, which hit 11-year lows earlier in the week, was also well up. The sterling held gains after Wednesday’s bounce, having slumped to its weakest level since 1985 except for a 2016 “flash crash”.
The unit has enjoyed buying as lawmakers in Westminster push through legislation to avert crashing out of the EU on October 31, delivering an embarrassing blow to new Prime Minister Boris Johnson. – AFP
