Global stocks and oil prices climbed while China’s currency gained ground as markets bet President-elect Joe Biden would usher in greater US policy stability and further monetary stimulus to counter the coronavirus pandemic.
Equities markets rose across the board in Asia on Monday. Japan’s Topix index climbed 1.7 per cent, while China’s CSI 300 index of major Shanghai- and Shenzhen-listed stocks jumped 2.1 per cent and Hong Kong’s Hang Seng rose 1.6 per cent.
India’s Sensex jumped as much as 1.6 per cent to a fresh record high while South Korea’s Kospi added 1.4 per cent.
US media networks declared Mr Biden the winner over Donald Trump on Saturday after the Associated Press called the state of Pennsylvania for the former vice-president.
Mr Trump has not yet conceded, breaking with modern precedent, but Mr Biden is already preparing executive orders to reverse many of his predecessor’s signature policies.
Mr Biden has made ending the coronavirus outbreak in the US a priority and is expected to spearhead an additional stimulus effort to cushion the economic blow from the pandemic, in addition to raising taxes.
Investors said the broad feeling was that the incoming administration would ease trade tensions with China and remove at least one of the shadows hanging over Asia’s markets.
Chinese tech stocks under regulatory pressure from the outgoing Trump administration rose, with Beijing-backed chipmaker SMIC up 5.7 per cent in Shanghai and telecoms group ZTE advancing 7.1 per cent in Shenzhen.
China’s currency also got a boost. The onshore renminbi exchange rate strengthened 0.5 per cent to Rmb6.5767 against the dollar on Monday, touching a fresh 28-month high and taking gains for the year to 5.7 per cent. The renminbi rallied last week as results suggested Mr Biden could unseat Mr Trump, who instigated a trade war between the US and China.
On Monday in Asia, futures also pointed to further gains for Wall Street, with the S&P 500 tipped to rise 1.4 per cent and the Nasdaq expected to climb 2.1 per cent.
Last week, US stocks recorded their best five-day run since April in anticipation of a victory for Mr Biden, even after stalling on Friday as investors pocketed profits. The S&P 500 finished the week up 7.3 per cent while the Nasdaq Composite rose 9 per cent.
“US companies would experience an earnings reset if the Biden tax plan passes, although the effects would be manageable and likely offset, in part, by fiscal stimulus,” said David Eiswert, portfolio manager of global focused growth equity strategy at T Rowe Price.
Oil prices also rallied with Brent crude, the international benchmark, advancing 2.4 per cent on Monday to $40.39 a barrel.
“While a Biden presidency increases the likelihood of Iranian oil supply returning to the market, this is not something that will happen overnight, and we still believe it’s more likely an end of 2021-2022 event,” said Warren Patterson, head of commodities strategy at ING.
The surge for equities in Japan came despite a persistent strengthening of the country’s currency. A stronger yen — which some analysts believe could challenge the critical ¥100-per-dollar line in coming weeks — has traditionally put downward pressure on the Nikkei, which is perceived as particularly sensitive to the health of Japanese exports.
The Nikkei 225 surged as much as 2.6 per cent on Monday, after closing on Friday at its highest level since November 1991 — a breakout that may have convinced a number of investors holding short position on the Nikkei to abandon them.
But Takeo Kamai, head of execution services at CLSA, said the Japanese market’s strength had in some sense become self-fulfilling.
“The Nikkei has broken out and the trade is a catch-up with what we’ve been seeing in the US. Still, the conviction is not quite there. In terms of volumes we are looking at a decent day not a spectacular one,” said Mr Kamai.
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