Coronavirus News Asia

China rebound boosts markets but US friction a worry

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Hong Kong: Asian markets were watchful on Friday after data from the world’s second-largest economy showed early signs of recovery despite US-China tensions continuing to simmer and dampen sentiment. 

China industrial production rose 3.9% in April on-year, beating the expectation of a 1.5% rise, although retail sales contracted 7.5%, higher than the estimated fall of 6%. 

“China’s macroeconomic data for April has been showing early signs of a V-shaped recovery following the Covid-19 crisis,” said Nupur Gupta, Portfolio Manager, Investment Solutions at Eastspring Investments.

“China’s recovery so far acts as a good template for the rest of the world and is likely giving markets a reason to believe that a V-shaped recovery is underway.”

Japan’s Nikkei 225 reversed its early losses to finish up 0.62% and Australia’s S&P ASX 200 rose 1.43%, and the MSCI Asia Pacific index climbed 0.63%. But the Hang Seng benchmark eased 0.14% and China’s CSI 300 share index is 0.32% dropped after the sticker shock from the retail sales data.

Slow to recover

“Consumption has been understandably slow to recover after China reopened in April. While today’s numbers show continued contraction in Chinese retail sales, we have seen a sequential improvement in consumption since March, reflecting more normalised economic activity despite holiday outings remaining muted in April,” Binay Chandgothia, managing director at Principal Global Investors, said.

He expects China’s GDP to expand in the second half of the year, assuming a global containment of the virus. However, he warned the US-China relationship, had the potential to significantly impact the speed of the market recovery.

Reflecting the expectation of improved demand, oil prices rose with the WTI rose 2.8%.

Still investors are eyeing the US-China war of words after US President Donald Trump slammed China over its handling of the coronavirus outbreak, saying he has no interest in speaking to President Xi Jinping at the moment. “We could cut off the whole relationship. You’d save $500 billion if you cut off the whole relationship,” he said.

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