Asian shares held two-month highs yesterday as Chinese data showed the economy slowing, while still managing to reassure investors it was not in danger of a hard landing.
Adding to optimism were growing bets that the US Federal Reserve is likely to delay its first rate hike since 2006 until next year, encouraging investors to hunt for bargains in beaten-down Asian equities.
The US dollar slipped as investors took profits.
Photo: Reuters
While China’s quarter growth data last month was its weakest since the global financial crisis of 2008, it was still better than market expectations — indicating that recent stimulus measures were having an impact.
MSCI’s broadest index of Asia-Pacific shares outside Japan bounced around in a tiny range yesterday in the wake of the China data.
It was last up 0.1 percent and on track for its best monthly performance since February 2012.
European stocks are expected to open broadly flat-to-higher lacking fresh data and taking cues from a sluggish Asian session.
Japanese shares edged 0.5 percent lower, while Australia’s rose 0.1 percent. Greater China shares were having a mixed day with mainland stocks rising 0.5 percent, while Hong Kong shares slipped 0.3 percent.
“The GDP data is better than anticipated. It could mean that previously announced stimulus, such as infrastructure investments, is beginning to work,” Kaiyuan Securities strategist Yang Hai said.
“The market is turning optimistic, against a backdrop of ample liquidity,” Hai said.
In another encouraging sign for Asian equities, Bank of America Merrill Lynch flow data indicated that emerging market equity funds saw inflows from the first time in three months.
Within Asia, investors have piled into the more cyclical sectors such as industrial, consumer discretionary and information technology shares at the expense of staples and healthcare sectors in recent days, indicating renewed investor optimism.
The CBOE Volatility Index, often seen as a gauge of investors’ fears in Wall Street shares, fell to a two-month low of 15.05 percent.
“Compared to some time ago, more people think things are starting to look up. Yet there remain concerns on the outlook for the global economy,” JPMorgan Asset Management global market strategist Yoshinori Shigemi said.
In foreign exchange trade, the US dollar held firm against a basket of six other major currencies, after US industrial production data and as the euro and the yen were capped by speculation of more money printing.
The US dollar’s index was at 94.665, on track to extend its rebound from its seven-week low of 93.806 on Thursday.
The euro was at US$1.1363, little changed on the day, but off Thursday’s high of US$1.1495.
The yen traded at ￥119.42 to the US dollar, off its seven-week peak of 118.065.
In commodities, prices stabilized after a recent rise as investors took profits from recent gains.
Oil prices edged up in early trade yesterday, extending a rebound on Friday after almost a week of declines.
Brent futures were US$50.27 per barrel, up 0.3 percent from late US levels last week. The 19-commodity Thomson Reuters/Core Commodity CRB Index edged higher.
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