There's No Momentum in This Market: Asia Stock Rally Fails Again

(Bloomberg) -- The only certainty for equity investors in Asia at the moment is how much uncertainty there is in markets.

The regional benchmark index was flat Wednesday as a boost from China’s pledge to cut taxes proved short-lived. Sure, China policy makers are propping up the economy -- the central bank pumped in a net 560 billion yuan ($83 billion) into the financial system Wednesday, a record one-day injection -- but growth concerns in Asia and elsewhere still weigh heavy on investors’ minds, reining in any sustained rally.

Consider this: Regional national gauges were mixed and, apart from the Philippines, they all moved less than 1 percent. Japan closed slightly down for the day, while South Korea and Singapore rose less than 0.5 percent. Both the Shanghai Composite Index and CSI 300 Index were little changed.

There's No Momentum in This Market: Asia Stock Rally Fails Again

In Hong Kong, whose stocks have had wild moves in the past two days, there’s an apparent lack of forward momentum, according to Bloomberg Markets Live Strategist Mark Cranfield. While the Hang Seng China Enterprises Index has gained 4.1 percent in January, that enthusiasm hasn’t carried through to the corresponding futures, with open interest dropping by about 13,000 contracts since the start of the year, he said.

Adding to signs of a slowing economy, U.S. data showed weaker-than-expected manufacturing in New York state as measures of new orders and employment weakened. Expectations for business conditions six months out declined to the lowest in almost three years. And the partial U.S. government shutdown continues, with President Donald Trump and Democrats remaining at odds over funding for a border wall with Mexico.

Big U.S. bank earnings have been mixed, with JPMorgan Chase & Co. reporting on Tuesday fourth-quarter revenue from fixed-income trading that missed analysts’ estimates, just like Citigroup Inc. on Monday. While the stocks ended up rising, at least one analyst warned that there might be some disappointment if there’s also bad news at other banks. Goldman Sachs Group Inc., Bank of America Corp. and Morgan Stanley are set to report this week.

Then there’s the Brexit drama, with Prime Minister Theresa May facing a no-confidence vote Wednesday after a humiliating defeat in Parliament of her divorce agreement with the European Union. With the existing deal all but dead, options of a hard Brexit, an exit delay, a second referendum or even a general election are all on the table ahead of the March deadline.

“Markets will be choppy in coming days but it’s worth remembering that nothing fundamental has changed overnight,” Stephanie Kelly, a senior political economist with Aberdeen Standard Investments, wrote in a note Wednesday. “The wisest thing for investors to do in the short term is nothing.”

Stock-Market Summary

  • Japan’s Topix index down 0.3%; Nikkei 225 down 0.5%
  • Hong Kong’s Hang Seng Index up 0.3%; Hang Seng China Enterprises up 0.5%; Shanghai Composite little changed
  • Taiwan’s Taiex index down 0.4%
  • South Korea’s Kospi index up 0.4%; Kospi 200 up 0.5%
  • Australia’s S&P/ASX 200 up 0.4%; New Zealand’s S&P/NZX 50 up 0.7%
  • India’s S&P BSE Sensex Index little changed; NSE Nifty 50 little changed
  • Singapore’s Straits Times Index up 0.5%; Malaysia’s KLCI down 0.4%; Philippine Stock Exchange down 1.9%; Jakarta Composite little changed; Thailand’s SET little changed; Vietnam’s VN Index little changed

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