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Asian markets up as investors remain buoyed by trade hopes

Asian markets up as investors remain buoyed by trade hopes

Business Desk Asian markets mostly rose Tuesday following another record close on Wall Street as investors bet on China and the US reaching a mini trade deal despite a report saying Beijing was concerned about the chances of an agreement. Hong Kong extended Monday’s rally with another surge but continuing protests in parts of the city — particularly a violent standoff at a university — remained a source of worry. Regional traders were given another strong lead from Wall Street, where all three main indexes ended at new records on hopes for a good holiday shopping season with the key Black Friday sales day coming next week. World equities have broadly been on the rise in recent weeks on optimism that the world’s top two economies will eventually hammer out a mini trade deal as part of a wider agreement. However, there have been bumps in the road and the latest came Monday when CNBC reported that China was pessimistic about the chances of a pact because Donald Trump is not in favour of rolling back tariffs. Trump last week denied claims by Beijing that the two sides had put in place a plan to remove levies as the talks progress. The report again highlighted the fragile nature of the negotiations. “Investors have little option but to keep pace with the rapid shifts on the US-China phase-one deal, attempting to make sense of the many comments — official and from press ‘sources’ — on whether a rollback was now genuinely on the table,” said Stephen Innes at AxiTrader. “Ultimately they remain hostage to these developments.” However, he said the broad gains on Tuesday meant “it looks like (investors) are starting to take trade headlines with a barrel of salt”. In early trade, regional markets swung in and out of positive territory. Shanghai jumped 0.9 percent, Sydney piled on 0.7 percent and Taipei rallied 0.5 percent, while Wellington and Manila were both up 0.2 percent. Jakarta and Mumbai also enjoyed gains. But Tokyo ended 0.5 percent lower, Singapore lost 0.6 percent and Seoul shed 0.3 percent, while Bangkok was slightly lower. National Australia Bank’s Rodrigo Catril said he was still betting on an agreement being reached. “The negotiations remain ongoing (and) a phase-one deal looks more likely than not, but as usual the devil will be in the detail,” he said in a commentary. “The more tariff rollbacks we get, the better for market sentiment and global growth outlook.” A decision by Washington to delay by another 90 days a ban of US firms from doing business with China’s Huawei provided support. While US officials initially said the row over the tech firm — which they warn is a danger to national security — was not related to the trade row, Trump has suggested a resolution to the standoff could involve reaching some common ground concerning Huawei. Hong Kong rose 1.6 percent, having jumped 1.4 percent Monday, as traders shift back into buying following last week’s losses of around five percent. The gains come as the widespread protests that hammered the city’s transport network last week have been less disruptive over the past two days. However, eyes were on a university campus where demonstrators have been holed up for three days, with fears of a violent crackdown by police. On currency markets, the pound extended gains on expectations Prime Minister Boris Johnson’s ruling Conservative party will win the upcoming general election with a healthy majority that will help him push through his Brexit deal. The pound was also helped by selling in the dollar, which came after Federal Reserve boss Jerome Powell met his arch-critic Trump to discuss monetary policy, including interest rates and foreign exchange. Powell said he reasserted the Fed’s independence during White House talks but the president, who has for years berated the bank’s rate policy, tweeted that he had protested about the “fact that our Fed Rate is set too high relative to the interest rates of other competitor countries”. In early trade London rose 0.2 percent, Frankfurt added 0.3 percent and Paris edged 0.1 percent higher. Wall Street’s reaction so far to Walt Disney Co’s long-awaited streaming service suggests investors believe the competition may not be as crushing as expected for entertainment rival Netflix Inc. Shares of Disney have surged 8 per cent since the launch of Disney+ a week ago, helped along by 10 million sign-ups for the service in its first day. But during the same period, Netflix’s stock recovered from an initial slump and is now up nearly 3 per cent, with some investors betting the two companies’ streaming offerings may be able to coexist. On Monday, Disney rose 2.1 per cent to $147.65, just shy of its record high close on Nov. 13, while Netflix climbed 2.6 per cent to its highest close since August. “I’m a consumer of both services and I can tell you that what my kids watch on Netflix is not what they watch on Disney+. Now I get it, and the market is reacting to that, appreciating the shares of both companies,” said King Lip, chief investment strategist at Baker Avenue Asset Management in San Francisco. Baker Avenue owns shares of Disney and recently began buying Netflix shares. Investors for months have viewed the looming launch of Disney+ as the most dangerous challenge yet to Netflix’s dominance of an increasingly crowded video streaming market. Disney’s stock has risen 27 per cent since April when Disney+ was unveiled, while Netflix remains down 18 per cent. Netflix Chief Executive Reed Hastings warned in September that competition arising from the entrance of Apple, Disney and NBC to the global streaming market would spark a surge in content costs, adding to worries about Netflix’s already slowing subscriber growth. Apple earlier this month launched its streaming video service, with a slim offering of original shows, for $5 per month, compared to Netflix’s $13 per month standard price. AT&T’s HBO Max is set to launch in early in 2020. Disney’s $7 per month service includes family-friendly new and classic TV shows and movies from some of the world’s most popular entertainment franchises. But Disney+ steers clear of content aimed at more mature audiences, often popular on Netflix, giving consumers reasons to pay for both, Lip said. Following its recent surge, Disney’s stock is trading at 23 times expected earnings, its highest forward earnings valuation since 2004, according to Refinitiv data. As investors reconsider the value of Netflix, its forward earnings multiple has been trading at under 60 since September, far below its average of 148 over the past five years. Chuck Carlson, chief executive of Horizon Investment Services in Hammond, Indiana, has been advising clients to avoid Netflix due to its valuation, rising production costs and concerns about weak subscriber growth. “Because Netflix is the leader, it has the most to lose, and now we are going to start seeing pretty steady data points coming out from all of the other streaming services,” Carlson said. “It still seems to be a tough story for Netflix.”

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