Asian shares rallied as chaos in Washington failed to shake hopes for renewed fiscal stimulus in the US, while pressure from the outgoing Trump administration hit Chinese tech sector stocks.
Japan’s Topix index rose 2.3 per cent in early trading on Thursday while Australia’s S&P/ASX 200 climbed 1.8 per cent and South Korea’s Kospi added 2.2 per cent.
Those gains came after Democratic victories were confirmed in Georgia’s run-off elections, handing the party control of the US Senate and clearing the way for the administration of President-elect Joe Biden to enact large-scale spending measures.
US stock futures also rose, with those for the S&P 500 climbing 0.6 per cent and those for the technology focused Nasdaq Composite index gaining 0.8 per cent. Futures for London’s FTSE 100 were up 0.9 per cent.
But investors shrugged off angry mobs of Donald Trump supporters, who interrupted Congress’s certification of Mr Biden’s election victory, forcing legislators to abandon the US Capitol building before reconvening late in the evening.
“We believe the [election] results offer somewhat of a best-case scenario,” said Citi analyst Ralph Giacobbe. He added that a Democratic majority in the Senate was likely to spur more stimulus spending, including support for state budgets under pressure from the coronavirus pandemic.
Overnight on Wall Street, the S&P 500 closed 0.6 per cent higher, led by gains for smaller companies and more cheaply-valued shares such as those in banking, energy and industrial materials.
The prospect of more US stimulus has prompted investors to bet on the Biden administration fuelling economic growth and inflation. The yields on US treasuries, which this week dropped to their lowest level since the start of the coronavirus crisis, rose 0.01 percentage point to 1.047 per cent.
The rotation away from highly-valued tech names was echoed in Asia on Thursday, with Hong Kong-listed banks HSBC and Standard Chartered rising by 3.7 and 6.8 per cent, respectively.
The shares of Alibaba and Tencent fell as much as 5.9 and 4.4 per cent in Hong Kong, respectively, following a Wall Street Journal report that US state and defense department officials were considering adding the tech groups to a blacklist prohibiting investment in certain Chinese companies.
China’s state-owned telecoms stocks also tumbled after the New York Stock Exchange said it would push ahead with delisting these companies, marking the second time it has reversed course on the matter.
The exchange said the decision was based on “new specific guidance” from the US Treasury department. The Hong Kong-listed shares of China Mobile and China Telecom both fell as much as 7.1 per cent, while those in China dropped up to 9.4 per cent.
The tech and telecom sector losses dragged the Hang Seng index down 0.4 per cent, while China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks rose 0.6 per cent.