Singapore leads Asian stock surge on hopes of sharp economic recovery

Singapore

SINGAPORE led Asia's stock markets on Wednesday in a rally on hopes that the global economy will rebound as lockdown measures ease.

The optimism from the reopening of economies continues to reign and fuel gains for global markets, sidelining geopolitical tensions and civil unrest across the US. The sentiment that sharp recovery is possibly underway was also boosted by Wall Street's overnight surge and better-than-expected economic data in Asia.

IG market strategist Pan Jingyi told The Business Times (BT): "Financial markets are looking past the geopolitical concerns, perceiving the month-on-month improvement, with May economic data as evidence of the worst being over and thereby picking up riskier assets."

The Caixin China services purchasing managers' index, for instance, rose to 55.0 in May from 44.4 in April - a much-larger-than-expected jump into expansionary territory.

In addition, fresh news that China is reportedly buying US soybeans once again, may contribute to investors downplaying the significance of strained US-China relations, which previously weighed on equity markets, said Ms Pan.

Singapore's Straits Times Index was among the strongest-performing benchmarks in the region, surging 3.4 per cent. South Korea's Kospi also recorded strong gains, climbing 2.9 per cent as its government rolled out a supplementary budget worth US$29 billion.

Elsewhere in the region, Hong Kong's Hang Seng Index rose 1.4 per cent and China's benchmark Shanghai Composite Index inched up 0.1 per cent. The FTSE Bursa Malaysia KLCI Index gained 2.1 per cent, Tokyo's Nikkei 225 index rose 1.3 per cent and Indonesia's Jakarta Composite Index edged up 1.9 per cent.

Oanda senior market analyst Jeffrey Halley said that, given that there is no data to dampen sentiment - barring unexpected negative headlines - the "bullish mode is set to continue in Asia".

"For now, US-China trade fears have been collectively vanquished from the street's thoughts," he added.

But IG's Ms Pan said that the situation remains fluid and the "positivity could all dry up" very quickly if earnings fail to catch up.

Meanwhile, oil markets continue to rally ahead of analysts' expectations on the back of bullish sentiments and the prospect of Saudi Arabia and Russia extending production cuts in response to the energy industry's crisis.

DBS analysts noted in a report: "Demand destruction due to the Covid-19 pandemic response peaked in April as we had expected, but the easing of lockdown restrictions in some parts of the world ahead of the infection rates peaking out has meant that oil demand recovery could be faster than we had earlier anticipated."

As at Wednesday evening, Brent crude oil prices were approaching US$40 per barrel, more than doubling recent lows at end-April.