Asia-Pacific Shares Finish Week Mixed, but Upbeat Over Improving US-China Trade Relations

The major Asia-Pacific stock indexes finished mixed last week. Gains were posted in Japan, China and Australia. South Korea and Hong Kong were lower. Investors took most of their cues from Wall Street and economic data from China. Some of the results were skewed because of holidays early in the week.

In the cash market last week, Japan’s Nikkei 225 Index settled at 20179.09, up 559.74 or +2.85%. South Korea’s KOSPI finished at 1945.82, down 1.74 or -0.09% and Hong Kong’s Hang Seng Index closed at 24230.17, down 413.42 or -1.68%.

China’s Shanghai Index settled at 2895.34, up 35.26 or +1.23% and Australia’s S&P/ASX 200 Index finished at 5391.10, up 145.20 or +2.77%.

Japan – Easing of US-China Tensions Fuels Surge

Japanese shares advanced last week, in line with Wall Street’s gains, as news of top trade representatives of China and the United States holding phone talks calmed investors worried about simmering Sino-U.S. tensions, with cyclicals leading the rally.

On the domestic front, hopes for a potential lifting of Japan’s state of emergency in some areas before the nationwide deadline of May 31 also supported investors’ risk appetite, said traders.

Gains may have been limited because of the short public holiday week.

Top U.S. and Chinese trade representatives discussed their Phase 1 deal over the phone on Friday, with China saying they agreed to improve the atmosphere for its implementation and the United States saying both sides expected obligations to be met.

Japan’s economy minister Yasutoshi Nishimura said on Friday that more prefectures were reporting zero coronavirus cases on a daily basis and lifting the state of emergency for those regions before the nationwide deadline was within sight.

Hong Kong – GDP Plunges

Hong Kong posted its biggest-ever quarterly economic contraction on Monday, as the coronavirus pandemic dealt a blow to the Asian financial hub following months of social unrest.

First-quarter gross domestic product dropped 8.9% compared with the same period a year earlier, according to an advance government reading, falling short of market expectations and marking the city’s steepest GDP decline on record.

The economic downturn is attributed to “the continued weak performance in both domestic and external demand, as affected by the COVID-19 pandemic,” a government spokesperson said in a statement, adding that U.S.-China tensions and financial-market volatility “continue to warrant attention.”

In a news conference on Monday, Financial Secretary Paul Chan said the city’s economy “would not revive in the short-term,” as the three pillars of Hong Kong’s economic growth – exports, investment and consumption – have all been severely hit.

Australia – Buyers Cheer Lifting of Coronavirus Restrictions

Australian stocks ended higher last week, marking their second straight weekly gain, after the government unveiled plans to end most coronavirus restrictions by July and as talks between U.S. and Chinese trade officials lifted sentiment.

Hopes for an economic recovery at home got a boost from Prime Minister Scott Morrison’s plan to ease social distancing restrictions in a three-step process, which would remove all curbs by July and get nearly 1 million people back to work amid a decline in coronavirus cases.

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James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.