Hong Kong: Asian stock markets mostly rose on Wednesday, in line with recent global market volatility, as optimism about economic recovery and coronavirus vaccination offset concerns about the rapidly spreading Delta variant and China’s regulatory crackdown.
The exceeding-expected corporate earnings season and the Fed’s continued guarantee of its ultra-loose monetary policy cannot alleviate concerns that the outlook may not be as optimistic as initially hoped, as sentiment changes every day.
Nonetheless, after the S&P 500 index set a record closing price on Wall Street, it was still a day of gains on Wednesday morning and was helped by some bargain hunting.
The spread of variants of the Delta virus remains a major stumbling block to recovery, as the rapid increase in new infections around the world has forced some governments to re-implement strict containment measures.
The main concern of the market is China, where millions of people are blocked, and officials have announced travel restrictions in certain areas.
Since the disease first appeared in Wuhan at the end of 2019, the country has reduced domestic cases to almost zero, but is now facing its worst outbreak in months.
“While China’s resolve to control outbreaks has been well illustrated, markets will continue to watch the outbreak given the high transmissibility of the Delta variant,” said National Australia Bank’s Tapas Strickland.
“There are also concerns China’s domestic vaccines are less effective against the Delta variant.”
The brewing crisis in China has even led Nomura to cut its economic growth prediction for the third quarter and the year.
“The draconian measures taken by the government are resulting in potentially the most stringent travel bans and lockdowns in China since the spring of 2020,” said Lu Ting, Nomura’s chief economist for China, adding that recent deadly floods contributed to its decision.