Trade of the Day: Shares rebound on China data; oil gains on output cut hopes. Treasuries, gold weaken as investors dump safe havens.
Quote of the Day: “Beware the dangers of over-interpreting better news on trade. We expect the world economy to turn the corner in 2020, but the pace of recovery will be weak by past standards. Meanwhile, the trade war isn’t ending, it’s merely shifting to a new phase that is focused less on tariffs and more on issues around technology, investment and industrial strategy,” said Neil Shearing, group chief economist at Capital Economics.
Stock of the day: Clear Media Ltd rose 16.5% to HK$5.52 after its controlling shareholder told the stock exchange it is doing a strategic review of its 50.91% stake in the company. The stock has risen 38% in the past week. An offer by a new investor to buy the stake could trigger a mandatory offer to buy out the remaining shareholders. The company is mainly involved in outdoor advertising and operates businesses in Beijing, Shanghai, Guangzhou and mid-tier cities such as Wuhan, Hanzhou and Nanjing.
Number of the Day: 3.1 trillion Indian rupees. India’s gross taxes are budgeted to miss the target by this amount (or $43 billion), according to Jefferies analysts who predict significant slippages ahead for Asia’s third largest economy.
Tip of the Day: ”Defensive/Low Volatility stocks are attractively priced in Asia. The MSCI AC Asia Pacific ex Japan Minimum Volatility Index is trading largely in line with the MSCI AC Asia Pacific ex Japan Index, versus a historical premium of about 15%. Even in instances when the market is overpaying for defensive stocks, an active approach which seeks out cheaper stocks but with similar diversification benefits can still add value to investors,” said Eastspring Investments in its 2020 market outlook.
Asian risk sentiment made a mild recovery on Monday after robust Chinese manufacturing data gave investors confidence in the economy, confirming the recovery indicated by China’s official factory activity gauge at the weekend .
“Caixin PMI reflects more on the liquidity condition of SMEs and therefore the employment sub-index improved. But overall, except the employment sub-index, activities are still slow. In contrast, the official manufacturing PMI tells an infrastructure driven story. Exports are still shrinking. Combining the two, it is obvious that the manufacturing activities are supported by monetary and fiscal policies,” ING’s Greater China economist Iris Pang told Asia Times.
MSCI’s All Country World Index outside the United States rose 0.9%; the Nikkei rose 1%; and the HangSeng index edged up 0.4%. Futures on the S&P 500 Index were up 0.4% indicating an upbeat start when Wall Street resumes trading. Hong Kong’s market was driven by property, consumer and insurance stocks.
Later in the day the US Institute for Supply Management manufacturing and construction spending data will be released. Investors will also be focused on testimony before the European parliament by the European Central Bank’s new president, Christine Lagarde. She took over the helm of the ECB last month and markets will follow her speech to get hints about central bank policy direction.