The world’s largest regional free-trade agreement between Asian nations and the ruling out of a national US lockdown have buoyed sentiment to set Asia Pacific stocks on course to close at an all-time high.
The MSCI Asia Pacific Index rose 1.2% to 187.30 on Tuesday, boosted by Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co. shares. The gauge, on course 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 on Sunday inked the Regional Comprehensive Economic Partnership, or 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 Nov 16 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.”
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, are set to gain from the region’s greater control of the pandemic, 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.”
Tang expects further gains in Asia equity prices “especially since interest rates are poised to stay low”.
The Asian index has climbed 9.1% this month, with growth and cyclical stocks both surging. Some of this year’s worst-performing regional markets such as Singapore and Thailand have outperformed the measure so far in November.