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Saturday, December 4, 2021
Stocks & Shares

Asia stocks rally despite pandemic surge

MSCI's broadest index

MSCI’s broadest index of Asia-Pacific shares outside Japan increased 1% with broad gains in Sydney, Seoul and Hong Kong

Stocks in Asia rallied on Thursday, bonds nursed losses and oil held onto sharp gains as investors appeared to ignore virus worries for now and looked ahead to the European Central Bank (ECB) for reassurance on continuation of policy support for some time.

MSCI’s broadest index of Asia-Pacific shares outside Japan followed Wall Street higher and increased 1% with broad gains in Sydney, Seoul and Hong Kong. Japanese markets are closed for holidays.

There was no obvious catalyst for the recent rebound in stocks, or the drawdown on Friday and Monday.

Every now and then investors look for reasons to take some profits off and that’s what we saw, said Jun Bei Liu, portfolio manager at Tribeca Investment Partners in Sydney.

The market suddenly became worried about the delta variant and how it might affect the path to recovery, she said. But what we have compared with 12 months ago is quite a few viable vaccines, eventually we will be coming out of this and we are much closer to the end than we were 12 months ago.

Still, unlike Wall Street, most Asian indexes struggled to recoup early-week losses as Asia contends with pandemic in unvaccinated populations and amid China’s regulatory crackdown on technology firms.

Shares in heavily-indebted Chinese property developer Evergrande bounced back nearly 11 percent in Hong Kong after it said it had resolved legal disputes with a lender.

Elsewhere, resilience in the US dollar also suggests currency markets are still pretty cautious. The greenback traded near recent multi-month peaks early in the Asia session.

The dollar index was at 92.812, off a three-month peak of 93.194 and the euro was steady just above recent lows at USD 1.1791.

The dollar has been trading on the front foot regardless of the risk sentiment swings in recent days, Westpac analysts said in a note, supported by the view that high inflation could drive US rate rises.

A shift to a more structurally dovish European Central Bank should cement the dollar index at higher levels, the analysts said, with a test of the year’s highs likely this quarter.

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