Bulls And Bears

Optimism over US-China talks lifts Asian markets

STI up 0.8% but down 0.12% for the week; analysts doubt trade deal is near

Regional markets kept heading north yesterday, fuelled by optimism over news that the United States and China may resume trade talks, despite a new round of tariffs due to take effect this weekend.

Bourses in Australia, New Zealand, Japan, Malaysia and South Korea all rose, most adding between 1 and 2 per cent, but wary investors sent China's shares down.

Hong Kong's Hang Seng Index closed just 0.08 per cent higher amid news that leading pro-democracy figures had been arrested.

The Straits Times Index (STI) started strongly, then dipped in the afternoon before recovering to close the month's session up 24.69 points, or 0.8 per cent, at 3,106.52.

But the gains in recent days failed to offset the battering that the index took on Monday, and it lost 0.12 per cent over the week.

About 1.06 billion shares worth $1.17 billion changed hands, with gainers outpacing losers 218 to 175.

Yangzijiang Shipbuilding was again the STI's most active, closing flat at 91 cents with 69.4 million shares traded.

Other active counters were China Real Estate, unchanged at 0.2 cent on volume of 33.6 million shares, and Singtel, up 0.6 per cent to $3.17 on 31.7 million shares traded.

Applications for digital banking licences are now open and Singtel has shown interest in working with non-banking players, as well as traditional lenders, to obtain one.

Despite the cheery mood yesterday after China indicated it would not escalate the trade situation at this time, analysts doubt a deal is near. Mr Robert Carnell, chief economist and head of research for Asia-Pacific at ING, listed several reasons for his scepticism, including US President Donald Trump's likely belief that the US is faring better than China in the conflict.

Mr Carnell said Beijing's conditions for a satisfactory deal would require Washington to make concessions - for example, reversing existing tariffs and offering better treatment for Chinese tech companies such as Huawei - but this would make the US appear to be caving in.

"Markets are as happy today as a goldfish with a new rock in the tank to swim around," he said. "I'd be gearing up for the next down-leg, personally."

Next month's mood will continue to be influenced by the trade war and the likelihood of more talks, said FXTM market analyst Han Tan.

He noted: "Such a possibility allows markets to continue clinging on to the hope that a resolution is not dead in the water, with traders using this as an excuse to push further into risk-on territory at any given opportunity."

A version of this article appeared in the print edition of The Straits Times on August 31, 2019, with the headline 'Optimism over US-China talks lifts Asian markets'. Print Edition | Subscribe