What a difference a day makes: Regional markets enjoyed a shot of new year cheer yesterday after three grim trading sessions, thanks to China's fiscal stimulus and news that the world's two biggest economies will meet next week for trade talks.
There was little talk of Apple's revenue warning that panicked investors on Thursday.
Instead, it was a case of accentuating the positive as traders across the region homed in on bargains following brutal sell-offs in recent weeks. Shares in Hong Kong, Shanghai and Shenzhen were up by more than 2 per cent yesterday, in part due to pledges by Chinese officials that the government will step up its support for the economy.
The rally was evident here too, with the Straits Times Index up 1.54 per cent, while Korea, Thailand and Jakarta all rose about 0.8 per cent.
CMC Markets analyst Margaret Yang said: "The Straits Times Index exhibited resilience against the US sell-off on Thursday, as higher crude prices and hopes of more China stimulus boosted sentiment. Offshore and marine, banks, commodity, industrial sectors outperformed."
Banks set the pace: United Overseas Bank jumped 1.6 per cent, OCBC Bank rose 1.3 per cent and DBS gained 0.9 per cent.
Other standouts included Keppel Corp, which rallied 2.2 per cent, and Genting Singapore, ahead 2.1 per cent.
But DBS Bank head of research (Singapore equities) Janice Chua expects that the first quarter will continue to "pose challenges, with downgrades in GDP (gross domestic product) growth and corporate earnings cuts working their way through the final results of the last financial year".
Another wild card is whether the US Federal Reserve will be more cautious about further interest rate hikes, given signs that America's economic growth may be moderating.
European and US futures climbed yesterday on efforts to end a partial government shutdown. Investors were buoyed also by news that the United States and China are preparing to resume talks on Monday amid signs that US businesses are feeling the pinch of the trade war.
But it was not all good news. Japan slumped 2.26 per cent on its first trading day of the year on a much stronger yen and as investors there caught up with negative news.
Pressure on Apple suppliers continued to hit Taiwan's stock market, which fell further yesterday, down 1.16 per cent.
Still, sentiment improved partly on hopes of more China stimulus. The government will cut banks' reserve requirement ratios, taxes and fees as it seeks to reduce the risk of a sharper slowdown this year.
China slashed reserve requirements four times last year to free up more funds for banks to lend, and analysts expect three to four more cuts this year, starting this quarter.
CIMB economist Song Seng Wun noted that the cuts came earlier than expected, following more signs that the Chinese economy is slowing faster than expected.
"China's moves are cushioning the fall in markets," he said. "Will they be injecting more stimulus? Yes, because this year is the 70th anniversary of the founding of the People's Republic of China. They won't want to be celebrating against a backdrop of doom and gloom."