HONG KONG: Investors turned edgy ahead of the earnings season with the resurgence of coronavirus infections adding to the gloom.
China underperformed as the slowdown in credit growth resumed in March with the authorities signalling deceleration will continue as policymakers focus on reining in credit risks.
Japan’s Nikkei 225 index slipped 0.77%, Australia’s S&P ASX 200 eased 0.30%, Hong Kong’s Hang Seng index slid 0.86% and China’s CSI300 tumbled 1.74%. Regionally, the MSCI Asia Pacific index dipped 0.25%.
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“The vaccine rollout remains slow in Asia, but what is more concerning is a renewed divergence in virus caseloads, with second waves taking hold in India, the Philippines and now Thailand. And it continues to sully the global travel outlook,” said Stephen Innes, Chief Global Market Strategist at Axi.
“Traders need to ask themselves who’s next? The street is particularly worried given the spread of new variants and high fatality rates, and the latter could force more stringent lockdowns.”
Chinese data released on Monday showed bank loan growth in March slowed from 12.9% on year to 12.6%, driven entirely by slower lending to firms.
“We think that credit growth will slow further over the rest of the year. Bank lending faces significant headwinds: the PBOC reportedly followed up its Q1 mandate with a similar request in March to cap new lending for 2021 as a whole,” said Mark Williams, Chief Asia Economist at Capital Economics.
CREDIT DRAG
“Coupled with lower local government bond quotas, this window guidance points to a much weaker credit impulse this year. There’s typically around a six-month lag before shifts in credit growth show up in the wider economy – the credit slowdown will be a growing drag in the second half of the year.”
US Treasuries froze ahead of auction of three, 10 and 30-year Treasuries. The 10-year yield was unchanged at 1.66%.
“So where to for US Treasury yields in the week ahead? The answer from our bond team is a clear ‘higher’,” said ING Bank analysts Chris Turner, Francesco Pesole and Petr Krpata in a note.
“Behind that call are expectations for a strong US data set, including the March readings for retail sales [stimulus checks starting to come through], industrial production [better weather] and CPI [jumping to 2.4% YoY on base effects amongst other factors]. Add in fresh long-end Treasury supply for 10s and 30s and our team expect US 10-year yields to be testing 1.75%, if not higher.”
Asia Stocks
- Japan’s Nikkei 225 index slipped 0.77%
- Australia’s S&P ASX 200 eased 0.30%
- Hong Kong’s Hang Seng index slid 0.86%
- China’s CSI300 tumbled 1.74%
- The MSCI Asia Pacific index dipped 0.25%.
Stock of the day
E-commerce giant Alibaba’s shares surged as much as 9% after it was fined 4% of its profit under China’s anti-trust laws. Analysts are relieved because it could have been as high as 10%. “Today is an important day in Alibaba’s journey of growth. It is a new starting point for us, one where we tackle problems head on and commit to innovate. Alibaba would not have achieved our growth without sound government regulation and service, and the critical oversight, tolerance and support from all of our constituencies have been crucial to our development. For this, we are full of gratitude and respect,” the company said in a statement issued after the fine.
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