Asia-Pacific shares, China, yuan, Bank of Japan, Hang Seng index

Hong Kong will remove all mandatory PCR tests for inbound travelers, Chief Executive John Lee said in a press briefing announcing further easing of the city’s Covid restrictions.

Lee added the city will also cancel the vaccine pass scheme, adding that the government will adopt “more targeted measures” for elderly vaccination.

Hong Kong will also remove all social distancing measures, including a ban on group gatherings of more than 12 people, Lee said, adding the measures will take into effect Dec. 29.

– Jihye Lee, Lee Ying Shan

Hong Kong Chief Executive John Lee said that Hong Kong “has reached a relatively high vaccination rate,” adding that the city has a “sufficient amount of medicine to fight Covid.”

Free Covid vaccinations will however not be provided to short-term travelers, officials said in the briefing.

“We want to prevent visitors coming to Hong Kong to use the vaccines at the expense of Hong Kong people and we will not offer government procured vaccines free of charge to non Hong Kong residents,” government officials said, adding that visitors are required to stay a minimum of 30 days to receive a booster shot.

Daily Rapid Antigen Tests and regular PCR tests will still be required for those working for residential care homes, officials said.

—Lee Ying Shan

Hong Kong is slated to scrap its mandatory PCR tests for inbound travelers, South China Morning Post reported, citing people familiar with the matter.

The report added that Hong Kong will fully drop its vaccine pass scheme, which requires proof of three doses of Covid vaccination to enter certain premises – the city will also remove a mandatory five-day home isolation for close contacts.

Hong Kong Chief Executive John Lee is expected to announce the latest updates in a media briefing at 3:30 p.m. local time.

The measures will also include lifting a current ban on public gatherings of more than 12 people, while maintaining rules for wearing masks.

—Lee Ying Shan

Hong Kong-listed shares of Chinese EV maker Nio dropped 9.11% in Asia trading hours after the company lowered its fourth quarter delivery outlook, citing supply chain disruptions from Covid outbreaks in major Chinese cities.

The company now expects to deliver between 38,500 to 39,500 vehicles, down from its initial projection of 43,000 to 48,000 vehicles, according to the updated delivery guidance.

Its New York-listed shares saw an 8% drop during U.S. trading hours.

— Rebecca Picciotto, Lee Ying Shan

South Korea’s export growth in December is expected to mark the third month of annualized drop, according to economists polled by Reuters.

Average forecasts project exports to fall 10.1% in December on an annualized basis – a slight improvement after seeing a drop of 14% in November, when it saw the biggest contraction since May 2020.

Economists expect the country’s import growth in December to have dropped 0.6%, resulting in a trade deficit of about $6.7 billion.

South Korea is scheduled to release its trade data on January 1.

— Lee Ying Shan

The Bank of Japan reiterated that its latest decision to expand the yield curve control tolerance range does not mean a change in its direction of monetary policy, according to the Summary of Opinions from its December meeting.

“The expansion of the range of 10-year JFB yield fluctuations from the target level is not intended to change the direction of monetary easing,” it said.

“It is a policy measure to make the current monetary easing … more sustainable,” it added.

Japan’s central bank added that reviewing its inflation target of 2% is “not appropriate.”

“Revision of that value is not appropriate since it could make the target ambiguous and the monetary policy response inadequate,” it said.

– Jihye Lee

Shares of Tesla suppliers in Asia fell as production at the company’s Shanghai plant reportedly remained paused after seeing a wave of Covid infections among its Chinese workforce.

South Korea’s LG Chem fell 3.66% and Japan’s Panasonic lost 0.31% in early Asia trade. Shares of Contemporary Amperex Technology, also known as CATL, fell 3.39%.

– Jihye Lee

Oil prices rose on the back of a potential demand boost fueled by China’s reopening, as well as Moscow’s announcement to ban oil sales to countries participating in the U.S.-led price cap on Russian crude.

Brent crude futures rose 0.2% to $84.50 a barrel, while the U.S. West Texas Intermediate futures gained 0.19% to $79.7 a barrel.

According to a decree by Russian President Vladimir Putin, which was published on the Kremlin portal, Moscow said the established ban “applies to all stages of sales up to and including the final buyer.”

– Lee Ying Shan

The U.S. government is considering imposing new Covid rules for travelers from China, officials said.

“There are mounting concerns in the international community on the ongoing COVID-19 surges in China and the lack of transparent data, including viral genomic sequence data, being reported from the PRC,” officials said.

Separately, Japan announced on Tuesday it would require a negative Covid test for visitors from China starting Dec. 30.

Read the full story here.

– Jihye Lee

China’s official manufacturing Purchasing Managers’ Index for December is expected to come in at 48 on Saturday, below the 50-point mark that separates growth from contraction.

Analysts polled by Reuters predict the reading will remain unchanged from November’s reading released by the National Bureau of Statistics.

PMI readings are sequential and represent month-on-month changes in factory activity.

— Lee Ying Shan

Tesla suspended production at a plant in Shanghai on Saturday after a Covid outbreak among its employees at the facility, the Wall Street Journal reported.

The decision comes as an extension of a planned eight-day production pause, according to the report. The electric vehicle maker had informed employees that production will resume on January 2, it said.

Tesla stocks plunged 11% at the close and continued to slide further in after-hours trading.

—Lee Ying Shan, Alex Harring

Platinum is on track for its best quarter since 2009 — and stocks associated with the metal are also posting strong performances.

The metal is trading up nearly 19.86% compared with the start of the quarter. That’s the best performance platinum has seen since the first quarter of 2009, when it gained 19.89%.

If platinum surpasses that quarter, it will be the best quarter since the first in 2008. In that period, it gained 33.96%.

Stocks associated with platinum are rising in turn. During this quarter, Impala Platinum added 31.7%. Anglo American Platinum and Sibanye Stillwater followed, gaining 21% and 17.6%, respectively, in the same period.

The Platinum Investment Council attributed some of the price increase to physical stocks of the metal being imported into China, which has decreased supply elsewhere.

— Alex Harring, Gina Francolla

Oil prices reached a three-week high as investors hedged hopes of demand recovering on the latest news of China’s Covid restrictions easing.

Brent crude gained $1.55, or 1.9%, to $85.47 a barrel. U.S. West Texas Intermediate crude added $1.37, or 1.7%, to $80.93. 

Both hit highs not seen since Dec. 5 earlier in the trading day. China’s National Health Commission said Monday it would stop requiring travelers coming into the country to quarantine, a move viewed by investors as a key step in rolling back the Covid restrictions that have hampered global supply chains and travel.

Shares of China-based companies trading on U.S. exchanges rose in the premarket as the country eases Covid restrictions. China announced it plans to lift quarantine requirements for travelers beginning Jan. 8.

Shares of Alibaba gained 1.5%, while JD.com and Pinduoduo rose more than 2% each.

China ETFs also gained, with the KraneShares CSI China Internet ETF up 2.7% in the premarket, on pace for its first gain in three sessions. iShares China Large-Cap and iShares China Large-Cap added 2% each.

The news also lifted Macau-linked casino stocks in the premarket. Las Vegas Sands was last up 1.4%, while Wynn and Melco Resorts rose 2.5% and 4.2%, respectively.

— Samantha Subin

International stocks, but especially emerging market stocks — and most notably emerging market value stocks — offer the greatest likelihood of outperforming large and small stocks in the U.S. over the next seven years, even after adjusting for inflation, according to the latest monthly projection from Grantham Mayo Van Otterloo & Co.

Emerging market value stocks are likely to return a real 9% per annum over the next seven years, while emerging market stocks as a whole are forecast to return 5.2% a year. International small-cap stocks are projected to return a real 4.5% while international large-cap stocks come in at 2.4% a year, after inflation.

The U.S. isn’t forecast to keep up, with U.S. small caps projected to shrink 1.4% each year after inflation, and U.S. large caps estimated to fall an average 1.8% annually over seven years.

Similarly, emerging market debt is likely to end up as the best-performing fixed-income class, returning a real 3.5% annually, followed by U.S. cash at +0.8%, U.S. inflation-linked bonds at 0.3%. International bonds hedged against currency exposure are forecast to lose 1.8% a year and U.S. bonds to return -0.3%.

As stocks floundered in 2022, valuations improved and the outlook for future returns has brightened. At the start of 2022, GMO pegged emerging market value stocks to return +5% annually over seven years, emerging market stocks +2.2%, international small caps -1.2%, international large caps -2.5%, U.S. small caps -6.5% and U.S. large caps -7.3%.

U.S. cash was projected to lose the least amount of money at the start of the year, falling 1.1% a year after inflation looking out over the next seven years, followed by emerging market debt at -1.7%, U.S. inflation-linked bonds (-3.7%), U.S. bonds (-4.1%) and currency-hedged international bonds (-4.7%).

— Scott Schnipper

Bonds yields climbed Tuesday, putting pressure on growth stocks like technology.

The yield on the 10-year Treasury note was last up by 11 basis points at 3.854%. The 2-year Treasury yield rose 8 basis points to last trade at 4.402%.

Yields and prices have an inverted relationship. One basis point is equivalent to 0.01%.

The tech-heavy Nasdaq Composite, which is more susceptible to moves in rates, last traded 1.2% lower.

— Samantha Subin