Asia investors bet on 2021 rebound, sending shares to record high

Investors expect authorities to continue to make it easy for banks, businesses and people to borrow money and thus support their economies.

Japan share trading
Japan's Nikkei share average has risen nearly 16 percent in 2020 [File: Issei Kato/Reuters]

Asian shares hit a record high on Wednesday as investors bet on a strong economic recovery next year, as there is little sign policymakers are winding back large stimulus efforts aimed at staving off coronavirus-fuelled downturns.

MSCI’s gauge of Asia-Pacific shares excluding Japan rose 0.6 percent to hit a record high, led by gains in Chinese shares, bringing its gains so far this year to 18.2 percent.

Japan’s Nikkei share average lost 0.58 percent on its last trading day of 2020 after jumping to a 30-year high on Tuesday. For the year, it was up 15.8 percent.

“Investors stick to a bullish view overall and some are starting to bet further on rise in equity prices,” said Masanari Takada, a cross-asset strategist at Nomura Securities.

Convictions that global monetary authorities will continue to pump liquidity into the banking system to support the pandemic-stricken economy underpin risk assets.

“We think continued monetary and fiscal policy support means investors should take risk. Stocks will do better than bonds. Within bonds, corporate bonds should beat government bonds,” said Hiroshi Yokotani, the head of Asia-Pacific fixed-income business at State Street Global Advisors.

E-Mini futures for the S&P 500 edged up 0.13 percent, paring much of the losses made in the previous day after US Senate Majority Leader Mitch McConnell put off a vote on President Donald Trump’s call to boost COVID-19 relief checks.

At least five Republicans have so far voiced support for the higher payments, which would require 60 votes, including the backing of a dozen Republicans.

Dollar remains under pressure

In the currency market, the dollar dropped on the first day of trading for settlement in 2021 as traders started to dump the safe-haven US currency anew.

US dollar index chart [Bloomberg]

The euro rose 0.3 percent to $1.2295, after climbing overnight to a high of $1.2275, a level last seen in April 2018.

“The start of COVID-19 immunization campaigns in several countries as well as additional US fiscal support reduce downside risk to the global economy and bode well for general financial market sentiment,” analysts at Commonwealth Bank of Australia said in a note.

The Australian dollar rose 0.4 percent to $0.7637, just shy of a two-and-a-half-year high of $0.7639, while sterling traded up 0.25 percent at $1.3500.

The Japanese yen also gained 0.15 percent to 103.36 per dollar.

The US dollar was listless against a basket of chief currencies, losing 0.26 percent to stand at 89.769, within spitting distance from a two-and-a-half-year low of 89.723.

Gold supported

A sluggish dollar supported gold, with bullion prices up 0.26 percent at $1,882.80 an ounce.

Oil prices extended gains after a rebound overnight as investors hoped that an expanded US pandemic aid stimulus would spur fuel demand and stoke economic growth.

US West Texas Intermediate crude futures were up 0.39 percent at $48.27 a barrel.

Treasuries were little changed after trading sideways overnight in thin trade amid the year-end holidays. US two-year yields were steady at 0.127 percent and benchmark 10-year yields stood at 0.9364 percent.

Source: Reuters