John Lee's Covid Easing Measures Boost Hong Kong Stock Market

After Wall Street's losses overnight, Asia-Pacific markets traded mixed as investors weighed the potential headwinds for the economy in 2023. While some market participants remain optimistic about the region's growth prospects, others are concerned about the potential impact of rising interest rates and other factors on the economy.

Hong Kong's Hang Seng index rose 1.56% to 19,898.91, bucking the wider trend in the region as Chief Executive John Lee announced further easing of Covid measures in the city.

The Shanghai Composite closed 0.26% lower at 3,087.4 and the Shenzhen Component fell 0.86% to 11,010.53. The offshore yuan was little changed and last stood at 6.707 against the U.S. dollar.

In South Korea, the Kospi fell 2.12% to 2,280.45 as stocks of heavyweight chipmakers and battery manufacturers priced in the effects of ex-dividend, which shareholders would not be entitled to annual payouts for next year. Australia’s S&P/ASX 200 shed 0.30% to close at 7,086.4 after giving up earlier gains.

In Japan, the Nikkei 225 closed down 0.41% at 26,340.5 and the Topix declined marginally to end at 1,909.02. The Bank of Japan reiterated its stance on monetary policy at a meeting last week, during which it unexpectedly widened the target range for Japanese government bond yields.

Hong Kong will no longer require inbound travelers to take PCR tests, Chief Executive John Lee said in a press briefing announcing further easing of the city’s Covid restrictions.

Lee stated that the city will also cancel the vaccine pass scheme and adopt more targeted measures for elderly vaccination.

Hong Kong will remove all social distancing measures, including a ban on group gatherings of more than 12 people, on December 29, Lee said.

Hong Kong Chief Executive John Lee said that Hong Kong has reached a relatively high vaccination rate, adding that the city has a sufficient amount of medicine to fight Covid.

Officials said in a briefing that free Covid vaccinations will not be provided to short-term travelers.

Government officials in Hong Kong have announced that they will not be offering free vaccines to non-residents, in order to prevent visitors from coming to the city and using up the limited supply of vaccines. Visitors who wish to receive the vaccine will be required to stay in Hong Kong for a minimum of 30 days in order to receive a booster shot.

Officials said that daily rapid antigen tests and regular PCR tests will still be required for those working for residential care homes.

Hong Kong is planning to do away with its mandatory PCR tests for inbound travelers, according to the South China Morning Post. The move is reportedly being considered in light of the declining number of new coronavirus cases in the city.

The report also said that Hong Kong will stop requiring proof of three doses of Covid vaccination to enter certain premises, and will also remove the mandatory five-day home isolation for close contacts.

Hong Kong Chief Executive John Lee is expected to announce the latest updates in a media briefing at 3:30 p.m. local time. Lee is expected to provide an update on the latest developments in the city, including the ongoing protests.

The government will lift the current ban on public gatherings of more than 12 people, while maintaining rules for wearing masks. This will help people reconnect with friends and family while still staying safe.

After China announced that it would no longer require inbound travelers to quarantine, shares of reopening stocks listed on the Hong Kong Stock Exchange rose.

Chinese hotpot chain operators Haidilao and Xiabuxiabu both saw significant growth, with Haidilao adding 5.52% and Xiabuxiabu adding 2.23%. This is indicative of the growing popularity of hotpot among Chinese consumers.

Other consumer names such as Tencent Music Entertainment and Chow Tai Fook jewelry group rose today. Tencent Music Entertainment gained more than 5%, while Chow Tai Fook rose 1.80%.

Hong Kong-listed casino operators saw their stock prices rise today, with MGM China up 1.75% and Wynn Macau up 1.8%. Galaxy Entertainment rose 1.47% and SJM Holdings rose more than 1.82%.

Travel-related stocks also saw gains, with China Eastern Airlines rising 1.22% while China Southern Air gained 0.77%.

Nio's shares fell 9.11% in Asia trading hours after the company announced that its fourth quarter delivery outlook had been lowered due to supply chain disruptions caused by Covid outbreaks in major Chinese cities.

The company has revised its delivery guidance for the year, and now expects to deliver between 38,500 and 39,500 vehicles. This is down from the initial projection of 43,000 to 48,000 vehicles.

Its New York-listed shares saw a 8% drop during U.S. trading hours.

South Korea's export growth is expected to continue its downward trend in December, according to economists polled by Reuters. This would mark the third consecutive month of annualized decline for the country's exports.

According to average forecasts, exports are expected to decline by 10.1% on an annualized basis in December, which is a slight improvement from the 14% drop seen in November. This was the biggest contraction since May 2020.

According to economists, the country's import growth is expected to have dropped by 0.6% in December, resulting in a trade deficit of around $6.7 billion.

South Korea will release its trade data on January 1.At its December meeting, the Bank of Japan reiterated that its decision to expand the yield curve control tolerance range does not mean a change in its monetary policy direction.

The central bank clarified that the expansion of the range of 10-year JGB yield fluctuations from the target level is not intended to change the direction of monetary policy.

The Bank of Japan said that its decision to allow inflation to exceed 2 percent is a policy measure to make the current monetary easing more sustainable.

The central bank of Japan has stated that reviewing its inflation target of 2% is not appropriate at this time.

The central bank said that revising the inflation target could make it ambiguous and make the monetary policy response inadequate.

After reports surfaced of a wave of Covid infections among Tesla's Chinese workforce, shares of the company's suppliers in Asia fell. Production at Tesla's Shanghai plant reportedly remains paused.

South Korea's LG Chem and Japan's Panasonic both saw their shares fall in early Asia trade. LG Chem fell by 3.66%, while Panasonic lost 0.31%. Contemporary Amperex Technology, also known as CATL, saw its shares fall by 3.39%.

Oil prices rose on the back of a potential demand boost fueled by China’s reopening, as well as Moscow’s announcement to ban oil sales to countries participating in the U.S. - led price cap on Russian crude. This move by Russia could lead to higher oil prices globally, as the country is one of the world’s largest producers of crude.

Brent crude futures rose slightly to $84.50 a barrel, while U.S. West Texas Intermediate futures also gained 0.19% to reach $79.7 a barrel.

As decreed by Russian President Vladimir Putin, all stages of sales up to and including the final buyer are now banned, as stated on the Kremlin portal.

The U.S. government is considering imposing new Covid rules for travelers from China, officials said. The new rules would require travelers from China to quarantine for 14 days upon arrival in the United States.

Officials have expressed mounting concerns about the ongoing COVID-19 surges in China and the lack of transparent data being reported from the country, including viral genomic sequence data.

Japan has announced that it will require visitors from China to have a negative Covid test starting Dec. 30. This is in addition to the existing requirements for visitors from China, which include a 14-day quarantine.

China's official manufacturing Purchasing Managers' Index for December is expected to come in below the 50-point mark that separates growth from contraction. This is likely due to the ongoing trade tensions with the United States.

Analysts are predicting that the reading for December will remain unchanged from November's reading, according to a poll by Reuters.

PMI readings are a measure of month-on-month changes in factory activity. They are used as an indicator of economic health and can be used to predict future economic activity.

Tesla has suspended production at its Shanghai plant after an outbreak of Covid-19 among its employees, the Wall Street Journal reported.

Tesla has announced that it will extend its planned eight-day production pause by one day. The electric vehicle maker had informed employees that production will resume on January 2, it said.

Tesla's stock price took a sharp dive today, falling 11% at the close of regular trading and continuing to drop in after-hours trading. This is a significant drop for the company, and investors will be closely watching to see how Tesla responds in the coming days.

Platinum prices are on track for their best quarter since 2009, and stocks associated with the metal are also posting strong performances.

Platinum is up nearly 19.86% compared to the start of the quarter, its best performance since the first quarter of 2009.

If platinum prices rise in the next quarter, it will be the best quarter since the first quarter of 2008. In that period, platinum prices rose by 33.96%.

The price of platinum is on the rise, and stocks associated with the metal are following suit. Impala Platinum saw a 31.7% increase during this quarter, while Anglo American Platinum and Sibanye Stillwater gained 21% and 17.6%, respectively.

The Platinum Investment Council attributed the price increase to physical stocks of the metal being imported into China, which has decreased supply elsewhere.

Oil prices rose to a three-week high as investors bet that demand would recover after China announced plans to ease Covid restrictions.

Brent crude oil prices rose by 1.9% to $85.47 a barrel, while U.S. West Texas Intermediate crude oil prices rose by 1.7% to $80.93 a barrel.

Both China and the United States hit highs not seen since December 5 earlier in the trading day. China's National Health Commission said Monday it would stop requiring travelers coming into the country to quarantine, a move viewed by investors as a key step in rolling back the Covid restrictions that have hampered global supply chains and travel.

Shares of China-based companies trading on U.S. exchanges rose in the premarket as the country eases Covid restrictions. China announced on Monday that it plans to lift quarantine requirements for travelers beginning Jan. 8. The move is seen as a positive step towards normalization after a year of pandemic-induced disruptions.

Alibaba's shares rose by 1.5%, while those of JD.com and Pinduoduo both increased by more than 2%.

China-related ETFs were also up in premarket trading, with the KraneShares CSI China Internet ETF up 2.7%. This would be its first gain in three sessions. iShares China Large-Cap and iShares China Large-Cap added 2% each.

The news also lifted casino stocks that are linked to Macau in the premarket. Las Vegas Sands was last up 1.4%, while Wynn and Melco Resorts rose 2.5% and 4.2%, respectively.

According to the latest monthly projection from Grantham Mayo Van Otterloo & Co., international stocks, especially emerging market stocks, are likely to outperform large and small stocks in the U.S. over the next seven years, even after adjusting for inflation.

Emerging market value stocks are expected to outperform other stock categories over the next seven years, with an annual return of 9% after inflation. This is compared to an annual return of 5.2% for emerging market stocks as a whole, 4.5% for international small-cap stocks, and 2.4% for international large-cap stocks.

According to projections, the U.S. will not keep up with other countries in terms of economic growth. U.S. small caps are expected to shrink by 1.4% each year after inflation, and U.S. large caps are estimated to fall by an average of 1.8% annually over the next seven years. This is in contrast to other countries, which are projected to experience much higher levels of growth.

Emerging market debt is expected to outperform other fixed-income investments in the coming years, with an annual return of 3.5%. This is followed by U.S. cash at +0.8% and U.S. inflation-linked bonds at 0.3%. International bonds hedged against currency exposure are forecast to lose 1.8% a year, while U.S. bonds are expected to return -0.3%.

As stock prices declined in 2022, valuations improved and the outlook for future returns became more positive. At the beginning of the year, GMO estimated that emerging market value stocks would return +5% annually over the next seven years, while emerging market stocks as a whole would return +2.2%. International small cap stocks were expected to lose value at a rate of -1.2% per year, while international large cap stocks were expected to decline by -2.5%. U.S. small cap stocks were projected to lose value at a rate of -6.5% annually, and U.S. large cap stocks were expected to decline by -7.3%.

U.S. cash is expected to lose the least amount of money at the start of the year, falling 1.1% a year after inflation. This is followed by emerging market debt at -1.7%, U.S. inflation-linked bonds (-3.7%), U.S. bonds (-4.1%) and currency-hedged international bonds (-4.7%).

Bond yields rose on Tuesday, putting pressure on growth stocks like technology.

The yield on the 10-year Treasury note was last up by 11 basis points at 3.854%. The 2-year Treasury yield rose 8 basis points to last trade at 4.402%. This increase in yields is due to the growing concerns over inflation and the possibility of interest rate hikes by the Federal Reserve.

As yields increase, prices decrease, and vice versa. One basis point is equivalent to 0.01%.

The Nasdaq Composite, which is more sensitive to changes in interest rates, was last trading 1.2% lower.