Asia Markets

Asia Pacific markets up, yuan strengthens as optimism on US-China trade rise

Key Points
  • Chinese markets bounced in early trade, while markets in Japan and South Korea also jumped.
  • Europe's largest lender HSBC reported third-quarter pre-tax profits that fell 18% year-on-year to $4.8 billion in the quarter that ended September.
  • Markets in Singapore, India, Malaysia and New Zealand are closed for holidays.

Major Asia Pacific markets were in positive territory by Monday afternoon, as the U.S. and China appeared close to finalizing a "phase one" trade deal.

The Shanghai composite was up 0.85% to close at 2,980.05, while the Shenzhen composite jumped 1.53% to 1,657.38. Hong Kong's Hang Seng index bounced 0.76% in the final hour of trade.

Over in Japan, the Nikkei 225 climbed 0.30% to 22,867.27, and South Korea's Kospi gained 0.27% to close at 2,093.60.

Australia's S&P/ASX 200 traded flat to close at 6,740.70. Major miners gained by the close: Rio Tinto trimmed some earlier gains to trade up 0.48%, Fortescue Metals jumped 2.15%, while BHP Billiton rose 1.12%.

Markets in Singapore, India, Malaysia and New Zealand are closed for holidays.

Overall, MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.44%.

Europe's largest lender HSBC reported third-quarter pre-tax profits that fell 18% year-on-year to $4.8 billion in the quarter that ended September. Still, the bank said its before-tax profit in Asia climbed 4% from last year, noting a "resilient performance in Hong Kong."

HSBC earns most of its profits from Hong Kong, which has been hit by unrest for months. The city accounted for more than half the bank's pre-tax profits in the first half of this year. HSBC shares tumbled 2.76% in the afternoon.

Hong Kong-based insurer AIA, which also posted results on Monday, said in a statement it has already been affected by a "challenging operating environment, particularly in relation to current events in Hong Kong." Its value of new business, which tracks expected profits from new premiums, was up 1% to $980 million in the three months to September 30.

Its stock surged 3.61% by the afternoon.

The city's Financial Secretary Paul Chan said in a blog post on Sunday, according to a Reuters report, that Hong Kong is now in recession and it is "extremely difficult" to achieve the government's original forecast of 0% to 1% annual growth made before the protests.

Chan added that preliminary estimates for third-quarter growth on Thursday would show two consecutive quarters of contraction — the technical definition of a recession.

Hopes up on a finalized US-China phase one deal

On the U.S.-China trade front, the Office of the U.S. Trade Representative said Friday the countries have "made headway on specific issues and the two sides are close to finalizing some sections of the agreement."

On Saturday, China's Commerce Ministry said both sides have agreed to properly address core issues, according to a Reuters report. The ministry said in a statement both sides have confirmed that the U.S. will import cooked poultry from China, while Beijing will lift a ban on U.S. poultry.

Earlier this month, U.S. President Donald Trump had announced both sides have reached a "very substantial phase one deal," in trying to push for an end to the dispute that have caused several rounds of tariffs on hundreds of billions of dollars worth of each other's goods.

"What's not yet clear yet is if both sides have agreed that even if the planned December 15th tariff increases won't go ahead if Phase-One is agreed, whether there will be any wind back of the higher tariffs imposed on September 1st, something China was said to be demanding toward the end of last week but we doubt the US is ready to concede on," wrote Ray Attrill, head of foreign exchange strategy at the National Australia Bank, in a note Monday.

The offshore yuan strengthened to 7.0570 against the dollar on Monday afternoon around 3.12 p.m. HK/SIN, from a high of 7.0768 last week before those developments. The onshore yuan was at 7.0584, from a high of 7.0863 last week.

Meanwhile, the trade war continued to take its toll on China, with profits at the country's industrial sector falling 5.3% in September year-on-year, according to data from the the National Bureau of Statistics on Sunday.

Currencies and oil

The U.S. dollar index, which tracks the greenback against a basket of its peers, was last at 97.804, down from an earlier high of 97.894.

The Japanese yen traded at 108.70, strengthening from 108.79 seen earlier. The Australian dollar changed hands at $0.6817, following a low of $0.6808 seen earlier.

Oil prices declined in the afternoon during Asia hours with latest data showing that China's economy continued to slow. Global benchmark Brent edged down 0.23% to $61.88 per barrel. U.S. crude was down 0.26% to $56.51.