Daily Times

Asian equities mostly rose on Wednesday, continuing the recent volatile theme in global markets as optimism over the economic recovery and coronavirus vaccinations plays off against concerns about the fast-spreading Delta variant and China’s regulatory crackdown.

A forecast-beating corporate earnings season and constant reassurance from the US Federal Reserve over its ultra-loose monetary policies have also been unable to soothe fears that the outlook might not be as rosy as initially hoped, with sentiment changing day by day.

Still, in the morning on Wednesday, it was an up day following a record close for the S&P 500 on Wall Street and helped by some bargain-hunting. The spread of the Delta virus variant remains the major stumbling block to the recovery as a sharp spike in new infections around the world forces some governments to reimpose strict containment measures.

And the main worry for markets is China, where millions of people have been put into lockdown and officials have announced travel restrictions in some areas.

The country had brought domestic cases down to virtually zero after the disease first emerged in Wuhan in late 2019, but it 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.

Meanwhile, there is a worry that oil demand in the world’s number two economy could tumble as a result of the tough new measures, putting downward pressure on prices.

However, analysts remained broadly optimistic that while Delta was a concern, it was unlikely to have as big an impact on growth as last year, even as the Infectious Diseases Society of America said the variant could push the threshold for herd immunity towards 90 percent, from 70 percent.

Laila Pence, of Pence Wealth Management, told Bloomberg TV: “We think the Delta variant is not going to stop the recovery, it’s just going to delay it.

“The Federal Reserve is going to live with a lot more inflation. They don’t want to derail the recovery.”

In early trade, Hong Kong led gains as it jumped more than one percent though investors continue to fret over China’s crackdown on a range of sectors including tech, private tuition and property.

There is a fear that gaming firms could be next after a state-run media article described online games as “spiritual opium”.