Asian markets resume rally as pound holds ground

Business Tuesday 15/January/2019 14:05 PM
By: Times News Service
Asian markets resume rally as pound holds ground

Hong Kong: Asian markets on Tuesday rebounded from the previous day's sharp losses, with Hong Kong and Shanghai lifted by Chinese plans to slash taxes to boost the economy, while the pound extended gains ahead of a crunch Brexit vote.
China's disappointing trade data on Monday sent shivers through trading floors as it showed the long-running US tariffs row is beginning to bite.
But dealers got back on the horse, resuming last week's rally that was fuelled by optimism that Beijing and Washington will eventually resolve their differences and the Federal Reserve will pause in raising interest rates.
Tuesday's gains were helped by a bump in financials after Wall Street giant Citibank said it provided a positive outlook for its trading environment ahead of the corporate earnings season, while energy firms were supported by rising oil prices.
Hong Kong climbed two per cent, Shanghai ended up 1.4 per cent, with investors also cheered by news of a range of tax cuts to support the stuttering economy.
Officials said they had implemented tax and fee reductions worth about 1.3 trillion yuan ($192 billion) in 2018 and that "larger-scale reductions" were expected this year to aid small businesses and manufacturing.
They are the latest in a series of piecemeal stimulus measures in recent weeks, including tax cuts for small businesses and easing financial pressures on banks in order to boost lending.
"Investors have gained confidence as more stimulus moves have emerged and are expected to be intensively rolled out after the (Lunar New Year holidays),” said Zhang Gang, a strategist with Central China Securities.
The latest announcement comes a day after a disappointing batch of trade data and a slew of other figures showing the world's number two economy struggling. Next week sees the release of 2018 growth figures that are expected to be the weakest in almost three decades.
"Tax reduction is almost the only way to boost personal consumption and private businesses," which are the main worries in the current slowdown, Wang Jian, a Shanghai-based economist at Shenwan Hongyuan Group said.
"The government is very reluctant to go back to the big stimulus, and relaxing property policy is unlikely."
D-Day for May
Tokyo gained one per cent while Seoul, Singapore, Taipei and Mumbai were each more than one per cent higher. Sydney, Wellington and Jakarta were also well up.
Still, uncertainty is keeping traders' feet on the ground, with the US shutdown — now in its fourth week — beginning to fuel concerns and showing no sign of ending soon.
The pound continued to rise against the dollar and briefly broke above the $1.29 mark for the first time since late November ahead of the vote by MPs on Prime Minister Theresa May's controversial Brexit deal.
While the plan is expected to be rejected, experts say the margin of loss will be key. A massive defeat for the government would mean her deal is dead in the water and the pound could dive to a two-year low of around $1.22.
However, a smaller loss could provide some wiggle room for May to hammer out a more palatable agreement with her EU counterparts.
For their part, more than 100 members of the European parliament promised to back a delay to the Article 50 deadline of March 29 for Britain to formally leave the EU and try to avert an economically damaging no-deal split.
May on Monday delivered a last-ditch plea to lawmakers to back her deal, saying they "have a duty to implement the result of the referendum".
But with her defeat widely expected, opposition Labour leader Jeremy Corbyn has said he will call for a vote of no confidence in the government, which could lead to another general election, fuelling more uncertainty.
In early European trade London rose 0.7 per cent, Paris gained one percent and Frankfurt was up 1.2 per cent.