Asian stocks steady after gaining sports boost

Morning Note

Asian markets gained a reprieve this morning as Chinese money is pumped into equities.

Hong Kong’s Hang Seng Index rose 1.7% in Asian trading on Wednesday morning after being battered on Tuesday as China’s government announced yet another crackdown. This time, online gaming stocks are in the CCP’s sites, which state media has dubbed “spiritual opium”. Restrictions on this sector are expected.

However, some stocks that took the biggest hits yesterday have regained some footing as investors looked to bought during a wider sell-off. Tencent, which dropped 7% yesterday, had gained 6.3%, helping to reverse some of its losses. According to market observers, this was down to an influx of cash from mainland investors, rather than Hong Kong-based traders.

The company has committed to tighter controls to combat child online gaming addictions following the government’s rebuke. Still, not great for its owners who lost as much as $14bn in the recent drop.

Sports stocks are the new hope on Chinese markets. The CCP has announced a massive $775bn sports infrastructure investment plan in the run-up to the 2022 Winter Olympics. It has plans afoot to boost the percentage of Chinese citizens actively participating in sport and physical activity to 38.5% by 2025.

That includes construction of over 2,000 sports parks, fitness centres, and public sports stadiums. A group of sports-related government-backed SMEs is expected to be “cultivated” too.

On the announcement of these plans, sportswear manufacturers Li Ning Co. was up as high as 12% in Asian trading, while Anta Sports Products rose 10%.

Asian markets were also given a bit of a boost by increased Chinese services activity, helping to counteract a slowdown in manufacturing. The latest Caixin services PMI reading came in at 54.9 this morning – up from June’s reading of 50.3.

Turning to European markets, the FTSE100 has started the day on the front foot, rising 26.55 points to 7,137. At 15,666, the German DAX is up 94.65 points, while France’s CAC is also showing positive movements by rising 28.85 points to 6,760.

We’re due services PMI readings today for the EU and UK.

Ahead of tomorrow’s bumper Bank of England announcements, GBP/USD is making its way towards July highs again thanks to the softer dollar. At the time of writing, cable had reached 1.34914 as bulls take control.

Falling UK COVID-19 cases and the success of the nation’s vaccination programme are acting as the pound’s chief support. The EU backing off from threats over perceived legal action threats on the Northern Ireland protocols has also helped. Both the UK and EU are still in negotiations trying to find a solution to the tricky Northern Ireland question.

Gold has reacted positively to the weaker dollar too, helping reverse a three-day downward trend. It’s now heading back towards $1,820, but buyers still remain cautious.

Bitcoin continues to struggle. The crypto looked like it was pulling above $42,000 at the weekend, but as of Wednesday morning, BTC had slumped to around $37,778.

Oil has crawled back above the $70 level after dropping to $69 on WTI contracts yesterday. Rising global Delta variant cases has put pressure on demand recovery, and subsequently prices. Brent is trading at around $72.72, with WTI at $70.65. It’s an uncertain time for crude markets at the moment, although majors like BP, Chevron and ExxonMobil have recorded strong Q2 earnings off the back of strong oil prices in 2021. The next couple of weeks will be crucial for prices.