US-China tensions weigh on China stocks

The US session was a mixed one, with a lack of stimulus progress eroding the S&P 500 and Dow Jones, which fell 0.12% and 0.21% respectively. The Nasdaq benefited from IPO fever and as legacy rotated into working from home, finishing 0.55% higher. Following DoorDash on Wednesday, it was AirBnB’s turn to shine with its IPO, its shares doubling on Thursday and finishing with a market cap of over USD100 billion. If nothing else, the IPO mania highlights how keen retail investors are to grab a slice of the 2021 vaccine-led recovery action at any price.

In Asia, new US restrictions on China telco companies have seen mainland markets retreat today, as the reality strikes that relations between the two superpowers are as bad as ever. The Shanghai Composite and CSI 300 have fallen 1.10%. However, Hong Kong has eked out a 0.30% gain.

Japan has fallen 0.55% inline with S&P 500 and Dow Jones, although the tech-heavy Korean Kospi has risen 0.80%, mirroring the Nasdaq. Australian markets have followed Wall Street lower, the All Ordinaries falling 0.40%, and the ASX 200 falling 0.60%.

Regional Asian markets have shrugged off the malaise though, with the vaccine recovery story playing out there as the week ends. Notably, financial sector stocks have led Kuala Lumpur to a 1.60% gain led by Malaysian Bank, and Singapore is higher by 0.50% led by DBS. Manila has jumped 1.90%, with Bangkok 0.40% higher, with Jakarta and Taipei flat for the day.

The mixed day in Asia appears to reflect a soup of position adjustment, geopolitics, Wall Street’s lead and a shift to recovery potential in previously underperforming regional markets. Next week, a dovish FOMC will continue to back-stop asset prices globally, and any negatives today are likely to be noise and dips to buy, not a structural turn in sentiment. Ultra-loose monetary policy is the one ring to rule them all.