North Asian Markets More Vulnerable to Negative Sentiment Than ASEAN

Asian Equities Weighed Down By COVID

Asian markets were in defensive mode today, as concerns rose that COVID-19 may delay the global economic recovery. With a lack of other drivers in financial markets at the moment, intra-day sentiment was driving price movements, and today’s theme is definitely COVID-19. News that a giant container ship was aground and blocking the Suez Canal will not be helping sentiment in export-sensitive Asian markets.

The Nikkei 225 had fallen by 1.60% today, with every sector of the index in negative territory, suggesting that retail investors were moving to cash defensive positioning en masse. The Nikkei 225 was not far from support at 28,300.00, having broken its 5-month uptrend last Friday. Elsewhere, the KOSPI fell by 0.60%, partially supported by dovish central bank comments.

China was having another torrid day as retail investors also took fright. The Shanghai Composite and Shanghai Shenzhen CSI 300 fell 0.90%. Both indices have broken multi-month rising support lines in the past two weeks, leaving them vulnerable to deteriorating sentiment. The Hang Seng was also seeing an investor flight, falling 1.60% today.

In contrast, and in keeping with recent weeks, the more cyclical ASEAN markets were rather calmer, if still lower on the day. {{8897|Singapore} was just 0.15% lower, Kuala Lumpur eased 0.30%, with Jakarta falling 0.50%. Bangkok was 0.45% lower, and the Philippines just 0.20% lower. With a much lower beta to the tech-driven speculative mania of 2020 than North Asia, I expect ASEAN markets to continue outperforming.

By contrast, firm commodity prices have allowed Australia to buck the trend, with flooding causing supply disruption fears, notably coal. That has allowed resources to rise, lifting the ASX 200 0.75% higher and the All Ordinaries higher by 0.85%.

Overall, price action remains choppy, but there is no denying that North Asian markets appear much more vulnerable to negative sentiments right now, reflecting their juicy valuations after the 2020 rally. That has left them poised for a deeper correction from a technical perspective if the international outlook darkens. All-in-all though, equity markets appear to be chasing their tail a bit, with investor fear sentiments driving short-term direction making for a lot of noise, but little substance.

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