China stocks rose to post weekly gains, as upbeat profits from industrial firms pointed to a continued recovery amid the coronavirus outbreak.
(Bloomberg) -- Last year, Hong Kong Chief Executive Carrie Lam only made it through a few lines of her annual policy address before pro-democracy lawmakers forced her to flee the chamber and deliver it virtually.On Wednesday, she spoke for more than two hours to a legislative body with no members of an opposition that has long resisted the city’s integration with the mainland. After quoting Chinese President Xi Jinping at the outset, Lam defended Beijing’s sweeping actions to exert greater political control over Hong Kong while outlining steps aimed at interlocking the two economies.The address, which was delayed so Lam could consult Communist Party leaders in Beijing, featured a slew of references to the mainland compared with last year’s abbreviated speech. They included a section on the benefits of a sweeping China-imposed national security law, which prompted the U.S. to revoke Hong Kong’s special trading privileges and sanction top Chinese and Hong Kong leaders, including Lam.The 24,000-word speech featured few immediate measures that would provide relief for a city reeling from a new wave of virus infections, an economy in deep contraction and worsening wealth inequality. The Hang Seng Index pared an earlier gain of as much as 1.7% to close up 0.3% on the day.“For many small businesses that are still fighting to survive they would be disappointed, especially now that the city is entering the fourth wave of Covid outbreak,” said Tommy Wu, senior economist with Oxford Economics in Hong Kong.“The main objective of today’s policy speech was really about Hong Kong-China integration in the post-national security law era,” he said. “Many of the economic policies mentioned in the speech have a mainland China element to it, from finance to tech to youth employment.”Growing DoubtsLam’s remarks reinforced the extent to which Hong Kong’s future is tethered to China, a trend that has only accelerated as Beijing moved to snuff out any political dissent in the former British colony. While the city remains a conduit for Chinese companies to raise capital, more Western businesses are questioning Hong Kong’s viability as a financial hub -- particularly as doubts grow over the independence of the judiciary.Lam spent a sizable part of her speech promoting the Greater Bay Area concept that seeks to create a Silicon Valley-style regional economic zone with the nearby mainland cities of Guangzhou and Shenzhen. She spoke about various programs to boost employment opportunities for young Hong Kongers to take jobs in the mainland, including wage subsidies for Hong Kong tech companies to deploy staff in mainland cities and funding for a cross-boundary youth entrepreneurship plan.“The biggest opportunity lies with central government support to tap into the mainland market,” Lam said. “This is the growth engine.”However, critics in Hong Kong see the project as an attempt to further erode the former British colony’s autonomy following Beijing’s moves to crack down on political speech and assembly. Opposition politician Claudia Mo, who resigned along with other pro-democracy politicians this month, criticized Lam’s remarks on the Greater Bay Area, saying on Twitter that it would mark the “end of Hong Kong as we know it.”While some young people in Hong Kong would take up the offer to look for work in China, the majority are unlikely to jump at the opportunity, said Jean-Pierre Cabestan, chair professor of political science at Hong Kong Baptist University and author of several books on Chinese politics.“For them it’s a plan B if they can’t find anything here, or even a plan C,” he said. “And some want to leave Hong Kong anyway to go to Canada, Australia -- to migrate, because they can’t stand it anymore.”Lam didn’t announce any significant new spending measures in her speech, and an announcement on a stock connect initiative disappointed investors betting on more fund inflows into shares of technology behemoths listed in Hong Kong. The government has already provided more than HK$310 billion ($40 billion) in virus stimulus this year, with Lam previously saying that the tight fiscal situation means there’s limited room for more expenditure.“Japan is doing one more stimulus with huge debt and Hong Kong, with fiscal reserves, is not doing more,” said Alicia Garcia Herrero, chief Asia Pacific economist with Natixis SA. “I cannot really understand this.”In another sign of closer ties, the People’s Bank of China and Hong Kong Monetary Authority agreed to renew their currency swap program for five years and also expanded the size of the program to 500 billion yuan ($76 billion) from 400 billion yuan, China’s central bank said in a statement.The resurgence in virus cases is proving a more immediate setback for the economy, which is set to contract 6.1% this year. The government imposed new restrictions Tuesday, shutting down bars and nightclubs and limiting the number of people at banquets. The outbreak has already delayed a Hong Kong-Singapore travel bubble meant to revive tourism in the two financial hubs.Recent data shows a mixed outlook for the economy. Exports resumed their decline in October after a strong gain in the previous month. Bloomberg Economics’ high frequency dashboard shows subdued activity before the latest social distancing measures were imposed.Still, Lam said it was an urgent priority to end the “chaos” in the city. She said the central government had “no alternative” to stepping in this year and painted opponents who called for democratic elections as separatists who colluded with foreign powers. At the end of her remarks, Lam said she was “extremely grateful to the central government for its trust in me.”Overall, the speech is unlikely to improve Lam’s dismal popularity ratings, according to Ma Ngok, associate professor on Hong Kong politics at the Chinese University of Hong Kong.“Of course these policy measures won’t win over any support,” he said. “They hate her too much.”(Updates with analyst comments starting in fifth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- The Dow Jones Industrial Average topped 30,000 for the first time and investors piled into risk assets as a series of market-friendly developments unleashed animal spirits on Wall Street.The S&P 500 Index hit a record, spurred by the formal start of President-elect Joe Biden’s transition, news that all but removed the threat of a contested transfer of power. Investors also woke up with a clear sense of what Biden’s Treasury Department will have in policy preferences after he nominated Janet Yellen to the post. A third promising vaccine candidate added to the euphoria, boosting bets that the economy can soar next year.The rotation into risk assets was widespread. Small caps in the Russell 2000 added another 1.9%, pushing its November rally past 20%. Tesla Inc. tacked on another 6.4% and is now worth $500 billion. Carnival Corp. jumped 11%, Planet Fitness Inc. rose 8% and MGM Resorts International added 9%. Four stocks rose for every one that fell in the S&P 500, while only three Dow companies dropped. Bitcoin rose to a three-year high, topping $19,000 as it closed in on a record.The record runs come in the face of more troubling news on the virus front, with cases rising and more states enacting restrictions ahead of the Thanksgiving holiday. Wednesday will also bring a flood of economic indicators, from jobless claims to readings on consumer confidence and personal income. Trading volumes have been elevated in what is normally a calm week. More than 12 billion shares changed hands yesterday, up 75% from the Monday before last year’s holiday.“There’s nothing else to buy. People have this excess cash and they’re buying into the market and they’re chasing it,” Gene Goldman, chief investment officer at Cetera Financial Group, said. “People are ignoring the short term and just jumping in and buying. All the short terms news is being ignored for long term optimism.”Energy companies in the S&P 500 surged 4% on the back of oil’s advance past $45 for the first time since March. The dollar weakened versus major peers and Treasuries slipped. Gold fell toward $1,800 an ounce.As the S&P 500 pushes its November surge past 11%, a growing chorus is saying the rally can persist. Even after the latest advance, four of the 11 S&P 500 groups remain at least 8% below when the index set a record on Feb. 19. Expectation is mounting that as investors grow confident the vaccine will spark an economic boom, cash will continue flooding into the likes of banks, utilities and energy companies that have underperformed.“Everybody’s just ecstatic with the vaccine news,” said Jerry Braakman, chief investment officer of First American Trust, in Santa Ana, California, which manages around $2 billion. “We had to slug through the election results, there’s a sense of relief that we didn’t decay into anarchy. That was definitely holding back the economy. We know how well stock markets do with recovery and its vision ahead.”The rotation has been on display all month. Energy shares have surged almost 40%, while financial firms have rallied about 20%. Treasury yields have advanced and gold has stumbled.“Even though we’ve seen this pretty sharp rotation into cyclical stocks, we think this could go on for much longer given how unbalanced many investors’ portfolios are when,” said Bill Callahan, investment strategist at Schroders. “With the vaccine announcement it really doesn’t matter if the vaccine is distributed in the second quarter or third quarter next year, there is a light at the end of the tunnel.”Here are some key events coming up:Minutes of the most recent Federal Open Market Committee meeting are due Wednesday.U.S. jobless claims, GDP and personal spending data come Wednesday.U.K. expected on Wednesday to deliver the government’s spending plans for next year.Thursday sees a policy decision and briefing from the Bank of Korea.U.S. celebrates the Thanksgiving holiday on Thursday.The week ends with Black Friday, the traditional start of the U.S. holiday shopping season.These are the main moves in markets:StocksThe S&P 500 Index rose 1.6% as of 4 p.m. New York time.The Dow average added 1.5% to 30,045.The Stoxx Europe 600 Index rose 0.9%.The MSCI Asia Pacific Index rose 0.9%.The MSCI Emerging Market Index was little changed.CurrenciesThe Bloomberg Dollar Spot Index fell 0.4%.The euro climbed 0.4% to $1.1890.The British pound gained 0.3% to $1.3358.The Japanese yen was little changed at 104.54 per dollar.BondsThe yield on 10-year Treasuries jumped two basis points to 0.88%.The yield on two-year Treasuries increased less than one basis point to 0.16%.Germany’s 10-year yield gained three basis points to -0.56%.Japan’s 10-year yield climbed one basis point to 0.025%.CommoditiesWest Texas Intermediate crude surged 4.2% to $44.84 a barrel.Brent crude climbed 3.9% to $47.87 a barrel.Gold futures weakened 1.8% to $1,811 an ounce.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.