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Asian stocks erase 2020 loss as rally weathers virus resurgence

The Asia Pacific gauge remains more than 8% below the all-time high it set in January 2018.
Image: Kiyoshi Ota/Bloomberg

Stocks in Asia Pacific have dug their way out of a hole for the year as the global market recovery from the coronavirus continues to grind higher.

The MSCI Asia Pacific Index gained 0.6% to 171.31 as of 10:02 a.m. in Hong Kong, set to erase its year-to-date loss after the S&P 500 Index closed just shy of a record high. The measure has surged 41% from its March low, led by energy and materials shares as investors bet on a recovery in business activity amid the gradual lifting of lockdowns across the region. Utilities and financials have underperformed in the period.

The Asian index has rebounded after a sell-off that erased almost $6 trillion of its market value, thanks in no small part to a rally in Chinese shares that ranks among the best in the world. While optimism about the path of the pandemic has helped US shares approach new highs, enthusiasm in Asia has been more restrained as a resurgence of the virus in several countries in the region puts theories of a quick turnaround in corporate earnings to the test.

The Asia Pacific gauge remains more than 8% below the all-time high it set in January 2018. It continues to lag the S&P 500, which is up 4.6% this year helped by a rally in technology shares. The European benchmark has lagged far behind, and is still down about 10% in 2020.

“Barring sudden escalations in US-China trade tensions, the measure may well sustain the rally with the relative better performance of North Asia markets,” said Jingyi Pan, a market strategist at IG Asia Pte. The climb to a record high, however, will be “slow” given expected slowing in demand recovery and more noise heading into the US elections, she added.

Meanwhile, the “stay-at-home” trade continues to hold sway in Asia, partly due to stricter measures by regional governments to combat a resurgence of the virus. A Bloomberg-compiled basket of regional shares including video games, internet services and health-care names is slightly outperforming the MSCI Asia Pacific Index this month.

“Asia’s governments have been acting more conservatively in reopening their economies, and investors in the region have been taking note of that,” according to Steven Leung, an executive director of Uob Kay Hian (Hong Kong) Ltd. “But in the US, people are more optimistic. The expectation of a fast recovery now is getting higher after the recent news on vaccine.”

© 2020 Bloomberg

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