
Bloomberg
The world’s largest regional free-trade agreement between Asian nations and the ruling out of a national US lockdown boosted sentiment to put Asia Pacific stocks on course to close at an all-time high.
The MSCI Asia Pacific Index rallied as much as 1.5% to 187.70, helped by gains in heavyweights like Samsung Electronics Co and Taiwan Semiconductor Manufacturing Co. The gauge, headed for its longest winning streak in seven years, surpassed a previous closing peak reached in January 2018.
Asia Pacific nations including China, Japan and South Korea inked the Regional Comprehensive Economic Partnership (RCEP) — nearly a decade in the making. Meanwhile, advisers to President-elect Joe Biden said they opposed a nationwide US lockdown despite the pandemic accelerating, favouring targeted local measures instead.
“RCEP shows that globalisation is making a comeback,†Jefferies’ global equity strategist Sean Darby wrote in a note. “The ongoing steepening of the yield curve and quiet dollar depreciation are reinforcing the cyclical trade but it is global trade that is the biggest winner as economies and companies see reciprocal orders.â€
Global stocks have climbed to pre-pandemic levels after optimism about a vaccine last week added to a rally fanned by expectations that a Biden presidency would usher in more predictable US policies.
Asian shares, in particular, have gained from the region’s greater control of the pandemic, an earnings recovery and the pace of China’s economic rebound.
The regional trade agreement encompasses a third of the world’s population and gross domestic product.
“The main overhang that has now been removed is the US presidency,†said Justin Tang, head of Asian research at United First Partners. “With the end of Trump’s reality-TV style presidency, there is a sense of geopolitical stability and certainty.â€
Emerging-market currencies in Asia also rallied, with the Korean won rising to its highest since December 2018. The Indonesian rupiah led gains in Southeast Asia, advancing for the first day in four.
“The Indonesian rupiah has been lifted by better risk sentiment, with the signing of the RCEP bolstering optimism that Asian trade integration will continue apace in the future,†said Chang Wei Liang, a macro strategist at DBS Bank in Singapore. United First’s Tang expects further gains in Asian stock prices “especially since interest rates are poised to
stay low.â€