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Asian Stocks Up as Archegos Fallout Fears Ease, but Inflation Fears Rise

Stock MarketsMar 29, 2021 11:35PM ET
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By Gina Lee – Asia Pacific stocks were mostly up Tuesday morning, as investors continue to monitor further damage from Archegos Capital Management’s collapse. However, the quickening pace of both the U.S. economic recovery from COVID-19 and the vaccine rollout reignited inflation fears.

Japan’s Nikkei 225 inched up 0.05% by 11:24 PM ET (3:24 AM GMT). Nomura Holdings Inc (T:8604), who reportedly counts Archegos head Bill Hwang as a client, said it is too early to estimate the impact of losses tied to him.

South Korea’s KOSPI rose 1.09% while in Australia, the ASX 200 was down 0.58%.

Hong Kong’s Hang Seng Index jumped 1.17%, as the city prepares to relax some of its strict restrictive measures even further from Apr. 1. Meanwhile, the National People’s Congress Standing Committee’s unanimous vote reduced the number of directly elected seats to Hong Kong’s Legislative Council, and a vetting body to determine who can stand for election will be created.

China’s Shanghai Composite was up 0.56% and the Shenzhen Component was up 1.06%. Investors look to the manufacturing and non-manufacturing Purchasing Managers Indexes (PMIs) to be released on Wednesday, for further clues about the Chinese economic recovery.

Some traders demanded higher rates to hedge potential losses on the debt of banks caught up in the Archegos saga, including Nomura (T:8604) and Credit Suisse Group (NYSE:CS) so far, and the company said via a statement that “all plans were being discussed.”

However, credit markets remained calm as the Asian session progressed on Tuesday.

“It’s never better when you are a shark in the water to be buying from a forced seller,” Spotlight Asset Group chief investment officer, Shana Sissel told Bloomberg. Sissel remains skeptical of the potential for broader market fallout from Archegos, adding, “I find it hard to believe that this would have a systemic massive impact on global markets beyond the few positions that they held.”

The focus is instead on the progress of the U.S. economic recovery from COVID-19, with U.S. President Joe Biden to unveil a further stimulus program with a tilt toward infrastructure on Wednesday.

On the COVID-19 vaccine front, Biden also announced that 90% of adults will be eligible to be inoculated in April. A Pfizer Inc. (NYSE:PFE) and Moderna Inc. (NASDAQ:MRNA) real-world study also showed their doses effectively prevented coronavirus infections, according to U.S. government researchers.

The rapid pace of the vaccine rollout and the prospect of more stimulus measures in the U.S. has revived inflation fears among some investors, however.

“The ongoing smooth vaccination in the U.S. and extensive fiscal support is lifting the growth outlook, and with it, inflation expectations,” said Esty Dwek, head of global market strategy at Natixis Investment Managers.

However, she added that the rise in yields “has not led to flows out of equities. The fundamental support for risk assets is in place.”

Asian Stocks Up as Archegos Fallout Fears Ease, but Inflation Fears Rise

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