ASIAN MARKET – Asian stocks were higher on Friday after index publisher MSCI announcement which said it would increase the weighting of Chinese mainland shares in its benchmarks that measure stock performances globally. Meanwhile, the dollar benefited from robust economic data.
The MSCI index said that it would increase four times the weightings of China’s A-shares, to be implemented later this year. This may be a catalyst for drawing more than $80 billion of fresh foreign inflows to the world’s second largest economy.
As a result, China’s blue-chip CSI300 index climbed 2.2 percent to end the week as its best since November of 2015.
MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.3 percent higher from the last close. It was partly helped by the strength of other markets in the region.
Meanwhile, Japan’s Nikkei was 1 percent higher thanks to a weaker yen. Australian shares gained 0.4 percent.
In Europe, major indexes followed suit, with spread-betters indicating London’s FTSE and Frankfurt’s DAX to open 0.5 percent higher. In Paris, the CAC index was seen increasing 0.3 percent at the open.
The optimism in US-China trade negotiations and expectations for continued government support and stimulus both drive Chinese major indexes, which are so far in a strong run.
“Just two months ago China was facing one of the worst years it’s ever had in terms of equity market performance. So I think investors are taking very seriously the fact that the rebalancing of MSCI is happening,” said an equity research head. “There’s a disconnect between China’s place in the world economy and China’s place in the world’s stock markets. And the two things can’t be diverged for so long.”
Trump Warnings on Trade Talks
Another factor weighing on the Asian market was US President Donald Trump’s latest warning, saying that he could walk away from the deal with China if it wasn’t good enough.
However, White House economic adviser Larry Kudlow said that the negotiations were making “fantastic” progress. He also said that the countries were “heading towards a remarkable, historic deal.”
Contradictory messages on trade, along with the failed summit between US’s Trump and North Korea’s Kim Jong Un over denuclearization, and weak economic data from China were all dragging pressures to US stocks.
“News that President Trump walked out of the meeting with Supreme Leader Kim, because the two sides couldn’t reach an agreement over North Korea’s nuclear disarmament, dashed hopes for an easing in geopolitical tensions,” said analysts.