Asian equities soared on Monday, led by China A-shares and Hong Kong H-shares as dollar retraced following the Jackson Hole meeting.
Shanghai Composite rebounded 1.9% to 2,780 points with strong volume, suggesting that capital is returning to the Chinese equity market after months of consolidating. The currency risk and trade tensions that triggered broad sell-off in the past few months are now moderating. Much-needed liquidity relief is being provided by policy makers via fiscal stimulus and accommodative monetary policy, which are likely to support the stock market in a recovery phase. Hang Seng Index jumped over 2% to above 28,000 points, riding the tailwind of China share rally.
Whether or not this technical rebound can roll out to be a mid-term rally largely depended on the direction of US dollar, and ongoing trade talks between US and its major trade counterparts. The Trump Administration and Mexico government have achieved major breakthrough in revamping the NAFTA trade agreement, sending US equities to record highs. Trump also urged Canada back to the NAFTA negotiation table, while the US-China talks ended with little progress.
Strong US session last night has spread positive sentiments over Asian equities at opening this morning, with major future indices opening mildly higher. The offshore CNH remained resilient against the greenback at around 6.79 area as dollar retraced against its major peers. Stabilised emerging market currency will help to restore investors’ confidence in the stock markets.
Technically, USD/CNH has ended its bull run and entered into consolidation phase. Its SuperTrend (10,2) and 10-Day SMA have both flipped downwards for the first time in over four months, suggesting the trend is reversing. Its immediate support levels could be found at around 6.80 (76.4%) and 6.70 (61.8%) area.
Gold prices rebounded for a second day to US$1,210 area backed by weaker dollar. Crude oil extended gains with Brent price climbing to US$76 area.
By Margaret Yang in Singapore
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