Asia: Equities track US records as stimulus bets roll in

[HONG KONG] Asian markets continued to push higher on Friday following another record-breaking performance on Wall Street as investors set their sights on a further huge US stimulus after Democrats took control of Congress.

The prospect of another massive splurge in the world's biggest economy helped divert attention from soaring Covid-19 infection and death rates that have forced governments to once again lock down as they try to quickly roll out vaccinations.

After Wednesday's extraordinary scenes in Washington that saw a pro-Donald Trump mob storm the Capitol complex, the president said he would allow for a smooth transition of power to Joe Biden and later called for "healing and reconciliation".

While the violence shocked the world, investors brushed it off but analysts said Mr Trump's comments would provide a little more reassurance.

Traders are now looking forward to hearing what Democrats propose to do with their new powers, with expectations they will try to revive their titanic spending plans that were cast aside last year to push through a second stimulus with Republicans just before Christmas.

Among the first pieces of legislation could be a drive to increase the cash handout included in that rescue package from US$600 to US$2,000.

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Observers also said earlier worries on trading floors that Democrats would try to hike taxes and pursue tighter regulations would likely disappear as lawmakers focus on eliminating the virus and reviving the economy.

And most agree that the prospects for 2021 are good, especially with the Federal Reserve pledging to keep interest rates at record lows for the foreseeable future and continue to provide vast sums as financial backup to businesses.

Axi's Stephen Innes said that high amounts of liquidity, stimulus and high savings rates had created "the perfect conditions for speculation and asset price lift-off".

'BULLISH' FOR 2021

Wall Street "expects a massive infusion either side of US$1 trillion in the first quarter that is built around further stimulus cheques, funds for state and local governments, and enhancements to unemployment benefits, among other provisions", he said, adding that a Biden presidency and the lifting of uncertainty from the White House was also a plus.

"Investors remain super bullish about the prospects for US equities in 2021. Effective vaccines mean consensus is aligned to a surge in economic activity and strong profit recovery."

All three indexes on Wall Street closed at records, with the Dow ending above 31,000 for the first time, and Asia picked up the baton.

Tokyo jumped 1.7 per cent, Taipei piled on one per cent, and Singapore added more than one per cent. There were also healthy gains in Shanghai, Sydney, Manila and Jakarta, though Wellington edged down.

Seoul climbed more than two per cent, helped by a jump in Samsung after it reported strong fourth-quarter earnings.

Hong Kong was up one per cent, though telecom giants tanked again after MSCI said they would be removed from its benchmark indexes a day after having their New York shares delisted in response to a Trump administration call to bar Americans investing in them.

China Unicom fell more than seven per cent, China Mobile sank five per cent and China Telecom dropped more than eight per cent - all extending Thursday's massive losses.

On currency markets, the dollar built on gains as investors revel in the prospect of a big spending spree this year to kickstart the economy, while bitcoin broke US$40,000 less than a week after cracking past US$30,000.

Investors will be keeping an eye on the release later Friday of US jobs data for December, with fears of a weak reading, days after news that more than 100,000 people had lost their jobs in the private sector.

AFP