Asian stocks remain under pressure, but it could be worse

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  • Asian stocks remain under pressure on Tuesday, adding to Monday’s substantial losses.
  • However, a stabilisation in Chinese stocks and currencies is helping to limit losses for the moment.
  • The Chinese yuan has also rebounded from earlier losses, underpinning Asian currencies after a sharp sell-off on Monday.

Chinese markets have stabilised after selling off sharply on Monday, helping to bring relative calm to stocks and currencies across the Asian region on Tuesday.

Here’s the scoreboard for stocks at 1.30pm in Sydney.

Australia ASX 200 6231.70 , -1.05%
NZ NZX 50 10070.22 , -0.56%
Japan TOPIX 1529.44 , -0.76%
Shanghai Comp 2893.38 , -0.36%
Shenzhen Comp 1542.81 , -0.58%
HK Hang Seng 28095.40 , -1.59%
Sth Korea KOSPI 2087.48 , 0.41%
Sinagpore STI 3200.98 , -1.03%
Taiwan TAIEX 10520.88 , -0.35%
Philippines PSI 7590.34 , -1.96%
Indonesia JKSE 6059.86 , -1.23%
Malaysia KLCI Index 1592.68 , -0.53%
Thailand SET 1635.93 , -0.26%
S&P 500 Futures 2820.75 , 0.49%

In comparison to the declines seen in Europe and North America to start the week, the losses at this point are comparatively small, reflecting not only that Chinese stocks have recovered from steeper losses at the open but also that many Asian bourses fell on Monday following an escalation in trade tensions between the United States and China over the weekend.

China’s Shanghai Composite Index currently sits down 0.4%, rebounding after falling more than 1% at the open. US S&P 500 futures — after tumbling 2.4% to start the week — also sit up 0.5%.

For the moment, the tit-for-tat tariff increases announced by both nations on the other’s imports since Friday has not led to any signs of panic-selling across the region or in US futures on Tuesday.

Whether that remains the case remains will likely be determined by any trade-related headlines or tweets in the remainder of the session.

According to analysts who spoke to Reuters, the resilient performance from Chinese stocks may reflect buying support from state-backed institutions within China, known in markets as China’s “National Team”.

Zhang Qi, an analyst at Haitong Securities, told Reuters there was “buying of key stocks” by state-backed players, noting that “volume in morning trade is close to half of yesterday’s full session”.

On Monday, China announced it will apply higher tariff rates on $US60 billion worth of US imports from 1 June 2019, reacting to the decision from the US to lift existing 10% tariffs on $US200 billion worth of Chinese imports on Friday.

“Volatility will remain high as the two nations remain far apart with the next meeting between leaders could come next month during the G20 in Japan,” said Alfonso Esparza, senior market analyst at FX brokerage OANDA.

“Stocks will remain sensitive to trade comments as both parties seem confident with little signs of making concessions.”

Mirroring the performance of regional stocks, Asian currencies are also putting in a resilient performance on Tuesday, helped by a rebound in the Chinese yuan after falling to the lowest level against the greenback since late 2018 on Monday.

The People’s Bank of China set the midpoint of the USD/CNY’s daily trading range at a four-month low of 6.8365 on Tuesday, the weakest level since early January. After lifting to as high as 6.8794, the USD/CNY currently sits at 6.8735.

A lower USD/CNY indicates a stronger yuan against the US dollar.

Speaking at a White House dinner on Monday, US President Donald Trump delivered an optimistic assessment as to whether a trade deal can still be struck with China.

“He just got back from China,” Trump said, referring to US Treasury Secretary Steven Mnuchin’s recent trade talks in Beijing.

“We’ll let you know in about three or four weeks whether of not it was successful … but I have a feeling it’s going to be very successful.”

Reflecting an easing in investor concerns, the Japanese yen has also softened against the US dollar, helping the Australian and New Zealand dollars post modest gains so far for the session.

AUD/USD 0.6952 , 0.13%
NZD/USD 0.6587 , 0.32%
USD/JPY 109.57 , 0.25%
USD/CNY 6.8735 , -0.04%
USD/CNH 6.8962 , -0.22%
USD/HKD 7.8488 , -0.01%
USD/KRW 1187 , -0.06%
USD/SGD 1.3688 , -0.08%
USD/TWD 31.10 , 0.00%
US Dollar Index 97.32 , 0.00%

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