Asia report: Stocks rise as Omicron variant fears fade

by | Dec 7, 2021

Markets in Asia closed in positive territory on Tuesday, as concerns around the ‘Omicron’ variant of Covid-19 ebbed and after China’s central bank vit its reserve ratio requirement for the second time this year.
In Japan, the Nikkei 225 was up 1.89% at 28,455.60, as the yen weakened 0.09% against the dollar to last trade at JPY 113.58.

Technology giant SoftBank Group surged 7.94% as it recovered from losses on Monday, while among the benchmark’s other major components, robotics specialist Fanuc was up 1.25% and Uniqlo owner Fast Retailing managed gains of 0.07%.

The broader Topix index was ahead 2.17% by the end of trading in Tokyo, closing at 1,989.85.

On the mainland, the Shanghai Composite managed gains of 0.16% to settle at 3,595.09, and the smaller, technology-heavy Shenzhen Composite slipped 0.72% to 2,477.49.

Fresh trade data showed imports to China jumped 37.1% in November, ahead of expectations, while exports missed forecasts as they rose 22%.

China’s trade balance for the month, meanwhile, came in at $71.7bn, falling from $84.5bn in October and settling well short of consensus expectations for $83.6bn.

“The larger than expected fall in the trade balance was driven by the strength of imports, but it is important to note a decline had still been expected,” said Pantheon Macroeconomics chief China economist Craig Botham.

“Given the base effects present in trade, a turning point in November was all but inevitable. The trade balance should fall further from here, given the reopening of regional factories, and increased Chinese demand for energy imports in particular.

“The extent, and duration, of the fall though will depend in part on the impact of Omicron.”

Overnight on Monday, the People’s Bank of China announced it was trimming the reserve ratio requirement – the amount of cash it mandates banks to ring fence in reserves – for the second time in 2021.

The central bank also said it would inject CNY 1.2trn into the Chinese economy in a bid to light a fire under slowing economic growth in the wake of the pandemic.

Elsewhere, South Korea’s Kospi was up 0.62% at 2,991.72, while the Hang Seng Index in Hong Kong jumped 2.72% to 23,933.66.

Technology plays in the special administrative region staged a recovery from Monday’s losses, with e-commerce giant Alibaba rocketing 12.24% by the end of the day.

China Evergrande was also in the green, rising 1.1% as it spluttered out a minuscule recovery from its losses in the previous session.

The blue-chip technology stocks were on the front foot in Seoul, with Samsung Electronics up 1.44% and SK Hynix rising 2.53%.

“Risk appetite is improving as evidence incrementally supports the case that the Omicron variant will be less damaging to the economy than was supposed at the end of November,” said chief market analyst Neil Wilson of the global situation on Tuesday.

“Traders and investors start to get twitchy about missing out on a Santa rally around this time of year, but bad Omicron news could emerge in the meantime.

“However, I would stick by my original commentary that this was likely to be overblown and provide some useful resetting of expectations for the market to rally.”

Oil prices were higher as the region went to bed, with Brent crude last up 2.56% at $74.95 per barrel, and West Texas Intermediate ahead 2.96% at $71.55.

In Australia, the S&P/ASX 200 was 0.95% firmer at 7,313.90, while across the Tasman Sea, New Zealand’s S&P/NZX 50 eked out gains of 0.01% to 12,609.88.

The down under dollars were both stronger on the greenback, with the Aussie last ahead 0.58% to AUD 1.4099, and the Kiwi advancing 0.28% to NZD 1.4764.

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