Hong Kong - Asian stocks edged higher on
Monday, helped by a strong Wall Street, and the dollar stood
tall against rivals after the latest US payrolls data
indicated strong underlying wage growth, strengthening the case
for more rate increases in 2017.
Underlying sentiment was increasingly cautious as investors
grew wary of the corrosive effects of a stronger greenback on
some Asian markets such as Hong Kong and before a news
conference by President-elect Donald Trump on Wednesday where
his views on global trade and China will be carefully
scrutinised for future policy implications.
MSCI's ex-Japan Asia-Pacific shares index
rose 0.3 percent after posting a rare loss in the previous
session. Australia's S&P/ASX200 rose 1 percent while
Hong Kong shares rose 0.4 percent. Trading was light
because Japan is shut for a holiday.
"The dollar's rising strength will be a growing concern for
Asian markets, particularly Hong Kong and investors will be
waiting for Trump's comments to get some clues on what areas the
new administration will focus on," said Alex Wong, a portfolio
manager at Hong Kong-based Ample Capital.
Foreign investors would be wary of buying local Hong Kong
assets due to the Hong Kong dollar's three-decade long peg with
the U.S. dollar, while the domestic business environment,
particularly for retailers, would suffer more as local residents
spend more abroad.
Notwithstanding the growing worries around Trump's stance
towards emerging markets on trade, 2017 has begun on a positive
note in terms of capital flows for Asian markets, helped by an
extended rally in U.S. equities.
Combined investment flows into Asia were positive at nearly
$600 million for the week ending 4th January, reversing outflows
posted for the previous week, according to data compiled by
Nomura analysts.
US stocks ended at record highs fuelled by optimism over
Trump's plans to stimulate the economy with lower taxes and
increased infrastructure spending. Both the Nasdaq and
the S&P 500 ended at record highs.
But with markets perched at record highs and valuations at
the upper end of historical trading ranges, particularly in the
U.S., market analysts are keenly aware that even a small
disappointment from Trump's policy proposals could trigger a
massive wave of profit-taking.
In currencies, the dollar started the week on a firm note
after Friday's data showed a rebound in US wages pointing to
sustained labour market momentum and more rate increases from
the US Federal Reserve.
"With expectations of more rate hikes on the horizon, we
believe the dollar will resume its upward trend versus emerging
market Asia currencies in the coming weeks," Gao Qi, an FX
strategist at ScotiaBank in Singapore wrote in a client note.
The dollar was trading at 117.21 yen, nearly 2
percent above Friday's lows of around 115. It was steady at
102.20 against a basket of currencies
China's yuan gained on Monday after Beijing fixed
the daily official fixing stronger than market expectations and
following weekend news showing foreign exchange reserves fell to
near six-year lows as authorities stepped up their intervention
to protect the currency.
Bonds were stung by the strong US data with both two-year
and 10-year US Treasury yields inching higher as market
participants pondered the probability of more rate hikes in
2017.
The yield on two-year US Treasury notes was
perched at 1.21 percent versus Thursday's low of 1.17 percent.
Oil prices edged lower thanks to a stronger dollar and
growing concerns over whether OPEC producers would stick to an
agreement to cut output. Brent crude futures were down
0.3 percent in early trade.