Asian Shares Struggle as Coronavirus Strains US-China Relations

Asian stocks opened higher on Friday as investors await data that may show China’s post-lockdown economic recovery is picking up steam. Treasuries kept gains. Meantime, some Asian economies that had enjoyed success quelling the coronavirus, including South Korea and China, are now facing a fresh rise in cases that underscore the tough path ahead. Meanwhile, the Malaysian benchmark index added 0.6% and was set for a third straight session of gains, helped by industrial stocks.

Chinese stocks edged up on Friday after factory output rose for the first time this year as coronavirus lockdowns were slowly lifted easing growth concerns and offsetting caution around an escalation in US-China tensions.

The Shanghai Composite index was 0.2% higher at 2,875.45 points. China’s blue-chip CSI300 index was flat with its financial sector sub-index higher by 0.3%, the consumer staples sector down 0.7%, the real estate index up 0.3% and the healthcare sub-index down 1.2%. Chinese H-shares listed in Hong Kong rose 0.3%, while the Hang Seng Index ticked up 0.4% to 23,925.40. The smaller Shenzhen index climbed 0.6% and the start-up board ChiNext Composite index was 0.7% higher.

Markets in the region were also pressured by worsening Sino-US relations over the new coronavirus as President Donald Trump said he had no interest in speaking to his Chinese counterpart Xi Jinping right now and suggested that he could even cut ties with China.

MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed with gains in Australia offset by falls in Hong Kong. Japan's Nikkei dipped 0.3 percent while mainland Chinese shares also ticked lower. US S&P500 futures dipped 0.15% after the index gained 1.15% the previous day recovering from a three-week low. The gauge rose 1.2% Thursday. Japan’s Topix index rose 0.6%. Hong Kong’s Hang Seng added 0.4%. South Korea’s Kospi index gained 0.3%. Australia’s S&P/ASX 200 Index rose 1.2%. The Shanghai Composite advanced 0.2%. Euro Stoxx 50 futures rose 1.3%. Major currencies in Asia were little changed with the euro changing hands at $1.0806 and the yen at 107.19 per US Dollar.

On other side, Indonesian shares were 0.4% lower with having fallen as much as 1.2% earlier. The country's $350 million trade deficit in April was larger than the $200 million gap expected in a Reuters poll due to exports and imports plunge. Philippine shares dropped more than 1% on Friday, dragged down by the financial sector while stocks in Indonesia hit an over three-week low after data showed that Southeast Asia's largest economy swung back to a trade deficit in April. Stocks in Vietnam ticked lower while Thai shares were little changed as energy stocks lent support on the back of higher oil prices. 

Many analysts regarded the drop as a natural correction after a fast rally since mid-March. They are also increasingly worried about US-China relations as US President Donald Trump blames China for the disease that killed more than 85,000 Americans.

By the end of this quarter, the Australia S&P/ASX 200 Stock Market Index is expected to trade at 5245.45 points, the New Zealand Stock Market (NZX 50) is expected to trade at 10582.91 points.

The Japan NIKKEI 225 Stock Market Index is expected to trade at 19470.68, the Hong Kong Stock Market (HSI) is expected to trade at 23156.30 points, the India SENSEX Stock Market Index is expected to trade at 30615.52 points, the Malaysia Stock Market (FBM KLCI) is expected to trade at 1377.82, the Singapore Stock Market (STI) is expected to trade at 2489.49, the Philippines Stock Market (PSEi) is expected to trade at 5445.65 points by the end of this quarter.