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January 19, 2018

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Shanghai shares hit 2-year high, HK at new record

SHANGHAI shares rose to a two-year high yesterday when Hong Kong stocks climbed to a fresh record as investors tracked another milestone on Wall Street, but Asia-wide markets struggled to keep up the recent momentum.

But while the afternoon saw a slight wobble across the region and some analysts warned of a possible correction, traders remain bullish on equities thanks to a healthy global economic outlook, optimism over the impact of Donald trump’s tax cuts and strong corporate earnings.

The Shanghai Composite Index gained 0.87 percent to 3,474.75 points, the highest close since the end of 2015.

After the market closed, data showed the Chinese economy grew a forecast-beating 6.9 percent in 2017, the first annual improvement since 2010.

The GDP reading follows strong trade data last week, which showed the humming global economy had propelled China’s export machine.

“This momentum, especially the part fueled by external demand, may carry on well into 2018,” said Wei Yao, chief China economist at Societe Generale.

Hong Kong’s Hang Seng Index ended 0.4 percent higher at 32,121.94, holding above the 32,000 mark it broke in the morning for the first time in its history. The market has fallen only once in the past 17 trading days.

Seoul was slightly higher, while Bangkok and Jakarta also rose. However, Tokyo dipped 0.4 after a late sell-off on profit-taking but still sits at 26-year highs, while Sydney was marginally lower and Singapore shed 0.5 percent. Wellington and Manila were also down.

A survey by Bank of America found fund managers were upbeat about the outlook and see equities continuing to rise into next year.

And Lucy MacDonald, chief investment officer for global equities at Allianz Global Investors, told Bloomberg Television: “It’s time for relative caution but we’re still overall pro-equity.”

However, she added: “Nominal returns in markets are liable to be lower than they’ve been in the recent past.”

There was also a word of caution from Joachim Fels at Pacific Investment Management, who said: “The fact that the fear is gone is the main reason why we should be worried.”

Traders started on the front foot after Apple said it will pay almost US$40 billion in taxes to repatriate US$350 billion following Trump’s tax cuts, adding that it will also boost jobs, hike wages and spend more on innovation.

“This is exactly the encouragement that Trump’s tax policy constructed for. The move by Apple will influence and at the same time impose pressure on other multinationals to follow suit,” said Shane Chanel, equities and derivatives adviser at ASR Wealth Advisers.

The pound held gains against the US dollar after climbing on Wednesday on comments from European Commission chief Jean-Claude Juncker that he would welcome any British attempt to rejoin the EU after it leaves. The remarks raised hopes Britain could exit on more favorable terms than have been expected and follow speculation about a possible second referendum.

“Some smooth-talking from Jean-Claude Juncker helped propel the pound ... as he appeared to not only suggest that the UK could come back after they leave but equally in the change of tone reflects that a ‘soft’ Brexit is now becoming a high probability,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.

Bitcoin rose above 10 percent to US$11,000, according to Bloomberg data, a day after falling through the US$10,000 mark for the first time since mid-December.


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