APAC Market Digest: Australia opens borders, China relaxes property lending requirements  APAC Market Digest: Australia opens borders, China relaxes property lending requirements  APAC Market Digest: Australia opens borders, China relaxes property lending requirements

APAC Market Digest: Australia opens borders, China relaxes property lending requirements

Equities 8 minutes to read
Jessica Amir

Market Strategist

Summary:  Australian borders open for the first time in two years, Biden and Putin talk hopes bring calm to markets. Why Endeavour (EDV), A2 Milk (A2M), AGL shares are all 10% higher today on the ASX. Meanwhile, the oil and iron ore prices simmer but both have long term upside due to the supply demand imbalances. PLUS the APAC considerations, trading ideas and earnings results to watch.

Co written by Market Strategists Jessica Amir in Australia and Redmond Wong in Hong Kong. 

What’s happening in markets?

  • In the US, The Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) futures are poised to slightly rebound from Friday’s sell off. It comes as talks were summoned between US President Biden to meet his Russian counterpart to possibly deescalate tension. US stocks have fallen for two weeks with the Nasdaq 100 and S&P 500 falling about 1.6% each last week as Russia Ukraine tensions escalate. However, that’s not the only headwind for broad US equities; investors are bracing for six interest rate hikes this year, which could take rates to 1.6%. From a technical perspective the Nasdaq 100 and S&P 500 fell below key levels, suggesting the broad markets could head back to January lows. Please note, Wall Street is closed Monday February 21 for a public holiday. Trades resumes February 22.
  • In Australia, today the Australian share market ASX200 (ASXSP200.I) started the trading week up 0.2%. Initially the ASX fell below a key support level, indicating further volatility could be ahead. But alas, on Biden and Putin talk-hopes, calm came to the market. PLUS, Australian borders opened to internationals for the first time in two years, but wait there's more... We also saw better than expected earnings results helped lift equities. While I’m at it, did you know, the ASX200 has outperformed US equities for three weeks in a row, thanks to Gold stocks charging while better than expected full year earnings results helped boost the ASX. Today’s stand out earnings reports came from; A2 Milk (A2M). Its shares rose 12% to a 4-month high after announcing it sees a stronger revenue ahead due to growth in China and with its English label infant milk formulae. The milk company’s Chinese earnings were also over 80% above some analysts expectations in the half year. While, the Woolworths Group (WOW) drinks company spin off, Endeavour Group (EDV) shares rose 10% to record high territory after reporting better than expected profits, while Australia’s biggest pub owner also said ‘the worst disruptions seems to have passed’ from covid19.
  • Hong Kong’s Hang Seng (HK50.I) and China A shares finished mixed on mixed ground on Friday. The Hang Seng Index (HSI) and Hang Seng Tech Index (HSTECH) fell 1.88% and 3.22% respectively. While, China A shares fared better, the CSI300 rose 0.48%. Meanwhile, the policy headwind for e-commerce platforms persists. Meituan (03690.HK) plunged 14.86% following a statement saying the National Development and Reform Commission (NDRC) would encourage food delivery platforms to cut service fees in an effort to support catering merchants who were hit hard by COVID-19. On the other hand, the beaten down Chinese property sector cheered signs of fine-tuning policies. Banks in a lower-tier city in the Shandong province recently reduced down-payment requirements for first-time home buyers, to 20%, down from the previous minimum 30%. Reportedly, local governments in more than 20 cities have relaxed the rule for home buyers to borrow from the social security fund. A share airlines rose, following NDRC’s announcement of suspension of airlines’ provisional VAT payments for one year.
  • In Singapore, the Straits Times Index (STI) ended last week with little change. Genting Singapore (GENS.SP) reported 2H21 results which missed market consensus estimates. Management expects conditions to improve as borders open and social distancing rules are relaxed. 
  • In Commodities: The Crude oil (OILUSMAR22 & OILUKAPR22) price continues to trade in limbo land but mostly lower, headed back to the $90 level as the market appears skittish that Iranian oil supply will come into the market. While Iran oil supply is not likely to ease the current supply shortages, long term upside back to the $100 remains in sight. The Iron ore (SCOH20) price is steady at $132.95. The Beijing Winter Olympics are now over. So the world awaits to see when China will unveil new stimulus and increase its buying of iron ore. However the technical levels suggest, iron ore could be susceptible to a pull back to around the $120 level, before resuming its uptrend in line with expectations that China in announce new infrastructure stimulus as a part of its five year plan. 

What to consider?

  • In regards to portfolio positioning: We’re seeing investors adjust portfolios, given the US central bank will be embarking of a suite of hikes for first time in 13 years. It’s expected to reduce company’s profitability, while many companies grapple with record high petrol prices and paying higher wages. This is why investors have been selling software, tech and high valuations stocks or companies that carry higher debt. The S&P500’s US Application Software Index, which includes stocks like Salesforce (CRM), Adobe (ADBE), Paycom (PAYC), is trading 22% lower this year for example. Meanwhile, investors are pivoting to buying stocks that will likely do well, with petrol, oil and gas prices to likely trade higher amid perpetual supply shortages, with earnings in these sectors tipped to bode well. This is reflected in the performance of the S&P500’s Oil and Gas Sector this year, including stocks like Haliburton (HAL), Marathon Oil (MRO), Exxon Mobil (XOM) with all trading up by 21%. Meanwhile, investors are also increasing their Gold (XAUUSD) holdings and positions in gold stock (given gold acts as a hedge and tends to outperform shares in rising interest rates cycles). And finally we are also seeing investors buy into travel and tourism companies, as earnings growth is likely to rise in these areas. All in all, at a broad index level, for the S&P500, we are expecting little growth this year as the Fed will hike rates. Goldman Sachs downgraded its expectations for S&P500 this year, expecting the index to rise just 11% from Friday’s close (4,418 point), with 8% earnings per share growth.
  • Australia biggest energy retailer AGL (AGL) shares were a bright light today on the ASX, rising almost 13% which is the most AGL’s shares have jumped in one day, EVER. It comes as AGL received a takeover offer for $7.50 per share from a consortium including the Atlassian co-founder. AGL later rejected the offer. AGL shares have been trending lower since 2017, and they’re now at 22-year lows as AGL's costs rose, while its customer growth remains low with Aussies turning to rooftop solar. However... it’s little known that AGL is involved in producing Australia’s first liquefied hydrogen exports. As part of the hydrogen project, AGL, along with Kawasaki Heavy Industries and a Japanese company Iwatani Corp and the Australian and Japanese Governments, liquefied hydrogen (made from Victorian Brown coal), will travel to Japan on a ship (a purpose built carrier), that docked in Australia last week. (Perhaps that's why Mike Cannon-Brookes made the takeover offer to buy AGL). Anyhow... The Australian Prime Minister Scott Morrison said the shipment of liquid hydrogen, will be the start of a major new energy export industry for Australia. AGL has also proposed to separate its energy retailer business, AGL Australia and the power generator Accel Energy in June.
  • For Hong Kong & China A shares: For the Renminbi: CNY and CNH traded strong last week. Offshore renminbi (CNH) once traded below 6.32 on strong international payment commercial demands.  As for Hang Seng Indices changes: The number of constituent stocks was increased to 66 from 64. Lenovo (00992.HK) and Nongfu Spring (09633.HK) were added. Xinyi Solar (00968.HK) replaced Evergrande Property (06666.HK) in Hang Seng China Enterprises Index. For Hang Seng Tech Index, SenseTime (00020.HK), Li Auto (0215.HK) and XPeng (09868.HK) replaced Tongcheng Travel (02015.HK), Weimob (02013.HK) and Autohome (02518.HK). In new infrastructure news: NDRC’s decision to build 10 new national computing nexuses and 8 new national data centres boosted the share price of data center, cloud computing and big data related companies trading in the A share market.  
  • In SingaporeThe country released its FY2022 (April 2022 to March 2023) budget, with FY2022 target at a deficit 0.5% of GDP, down from a deficit of 0.9% in FY2021. More targeted measures were announced to support households and businesses. In a move apparently to prioritize jobs for locals, the FY2022 budget tightened foreign labor policy, especially for some sectors employing large number of lower-skilled workers such as construction. The GST hikes from the current 7% were staggered and postponed in two steps to 8% in 2023 and 9% in 2024. Carbon tax and high income tax brackets were also raised.

Trading ideas?

  • General: Energy stocks generated some of strongest sales growth in the US, amid company reporting season. Now it’s Australia’s turn to digest earnings results. So far, the most ASX earnings growth has been from energy stocks. ASX Real estate stocks have generated the second strongest earnings so far. However, we encourage investors to review their portfolios, and take heed of these earnings results coming out. Remember earnings drives shares price growth and so does a stronger outlook. So as we are moving into a new cycle of higher interest rates, and higher energy prices due to long term supply issues, think of the companies that will likely generate stronger earnings growth this year. We think the most upside is in energy and commodity companies with strong balance sheets.
  • Asia: Chinese property companies which have relative strong balance sheets, especially those with state-owned enterprise (SOE) backgrounds may be able to utilize the shrinking of some overextended private enterprise property developers to acquire land banks and strengthen their market positions to benefit from potential stabilization or even modest recovery in the Chinese property market later in the year. 

Upcoming company earnings to watch in each region?


  • Feb 22: Alumina (AWC), Costa Group (CGC), Coles (COL), Ingenia (INA)
  • Feb 23: APA (APA), WorleyParsons (WOR), Woolworths (WOW), WiseTech (WTC), Bega (BGA), Healius (HLS), St Barbara (SBM), Domino's (DMP), Steadfast (SDF), Pilbara Minerals (PLS)
  • Feb 24: Perpetual (PPT), Qube (QUB), NEXTDC (NXT), Appen (APX), Flight Centre (FLT), Life360, 360), Nine Entertainment (NEC), Link Administration (LNK), Blackmores (BKL), APE Group (APE), Reece (REH), Qantas (QAN), Zip (Z1P)
  • Feb 25: Brambles (BXB), Medibank (MPL), Iluka (ILU), National Storage REIT (NSR)  Charter Hall  (CHC), Novonix (NVX), Lynas Rare Earths (LYC), PolyNovo (PVN)

Hong Kong & China A Shares:

  • Feb 21: Brilliance China Automotive (01114.HK)

  • Feb 22: HSBC (00005.HK), Nine Dragons Paper Holdings (02689.HK), Hang Seng Bank (00011.HK), ASM Pacific Technology (00522.HK), Awinic (688798.CH)

  • Feb 23: Galaxy Entertainment Group Ltd. (00027.HK), Lenovo Group Ltd (00992.HK),  SmarTone (00315.HK)
  • Feb 24: Aibaba (09988.HK), Hysan Development (00014.HK), Sun Hung Kai Properties Ltd (00016.HK), Hong Kong Exchanges & Clearing (00388.HK), Bank of East Asia Ltd (00023.HK), NetEase (09999.HK), PCCW Ltd (00008.HK), Pacific Basin Shipping (02343.HK)
  • Feb 25: Li Auto Inc. (02015.HK), AIA Group Ltd. (01299.HK), Beigene (06160.HK), New World Development Co. Ltd (00017.HK), HKT Trust & HKT Ltd (06823.HK), Seazen Group (01030.HK), NWS Holdings Ltd (00659.HK), Great Eagle Holdings (00041.HK),  Angelalign (06699.HK), Sunlord (002138.CH)


  • Feb 21: Raffles Medical (RFMD.SP)
  • Feb 24, Singapore Airlines (SIA.SP)
  • Feb 25: Singapore Technologies Engineering (STD.SP)

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