Asia shares set to rise after S&P 500, Dow hit records on strong economic data

(Reuters) – Asian equities are poised to rise on Tuesday after the S&P 500 and Dow indexes set records as a streak of strong U.S. economic data fueled optimism even as a smaller-than-expected climb in 10-year Treasury notes eased inflation concerns.

Investor sentiment was buoyed by a survey from the Institute for Supply Management (ISM) on Monday showing activity in the U.S. services industry reached its highest level on record in March. The data came after a jobs report on Friday beat forecasts with 916,000 added to the U.S. economy last month.

“The jobs report set the stage for what we’re seeing today,” said Thomas Hayes, chairman of Great Hill Capital LLC in New York. “It’s not only that the report crushed expectations but it showed that wage inflation was subdued as people compete for labor.”

Australian S&P/ASX 200 futures rose 0.34% in early trading, while Hong Kong’s Hang Seng index futures rose 0.40%.

The S&P 500 and the Dow – the benchmark Wall Street indexes – have rallied in recent sessions as widespread vaccinations and an unprecedented government stimulus boosted investor confidence in an economic rebound and spurred demand for sectors, including energy, financials and materials, which are primed to benefit from economic reopening.

On Monday, gains were led by sectors that have underperformed recently, including communication services, consumer discretionary and technology, as the 10-year U.S. Treasury yield remained below a 14-month high hit last week.

“The rate of change with the 10-year yield has slowed and that has created a runway for some of the left behind sectors in recent weeks like tech and other yield sensitive areas like utilities,” Hayes said.

On Wall Street, Dow Jones Industrial Average rose 1.13% to a record high of 33,527.19, the S&P 500 gained 1.44% to a record 4,077.91 and the Nasdaq Composite added 1.67%, to 13,705.59.

U.S. Treasury yields edged lower on Monday, as investors paused recent selling of government bonds and took profit from short positions, though the uptrend in rates remained intact following Friday’s blockbuster jobs report.

Benchmark 10-year notes last rose 3/32 in price to yield 1.7127%, from 1.72% late on Friday. The yield curve steepened on Monday after flattening the previous session as the spread between U.S. 2-year and 10-year yields rose to 154 basis points.

Gold prices edged lower as the safe-harbour metal’s luster was dimmed by rising global equity prices.

Spot gold declined 0.1% to $1,727.98 an ounce. U.S. gold futures settled little changed at $1,728.80.

Oil prices fell as increasing OPEC+ supply and rising Iranian output, along with the threat of a new wave of COVID-19 infections, offset hopes for a demand rebound driven by economic revival.

U.S. crude settled at $58.65 per barrel, down 4.6% on the day, while Brent shed 4.18% to end at $62.15 per barrel.

Asian SPAC listings face stern test as regulators consider rule changes

HONG KONG/SINGAPORE (Reuters) – Asian bourses from Tokyo to Singapore are considering rule changes to allow listing of SPACs, but some industry players say the region may not attract the kind of frenzy, or the massive billions of dollars, seen in the U.S. for such blank cheque firms.

The trend to list through Special Purpose Acquisition Companies (SPACs) has seen such floats raise $96 billion in the United States this year after a bumper 2020.

In Asia, industry executives worry that low valuations in some markets and the need for SPAC regimes to include strong investor protection safeguards would keep such listings from rapidly taking off.

“We don’t get the sense that anyone is rushing to do this,” said one person with knowledge of Asian exchanges’ informal consultations with industry executives, referring to SPAC listing prospects in Asia.

“Hong Kong is more strongly leaning to the no side, while Singapore, because it has less equities activity, has more pressure,” said the person, declining to be named as he was not authorised to speak to the media.

With the hot new method of floating a company taking the U.S. tech world by storm, Asian exchanges are stepping up efforts for SPAC listings although the response has been tepid in Europe.

Earlier this year, Singapore Exchange’s regulatory unit said it was exploring a consultation on SPACs, while the Hong Kong government directed the city’s exchange and regulator to look into allowing such listings.

Indonesia’s bourse has also said it would consider allowing SPACs, and in Japan, a government panel said SPACs listings should be considered to boost growth.

SPACs or shell companies, raise funds via IPOs to merge with operating firms and then take them public by enticing them with shorter listing timeframes and strong valuations.

One problem for SPACs in Hong Kong are recent rule changes brought in to resolve long standing worries about illegal practices linked to the formation and trading of shell companies.

“A lot of the changes that were introduced from 2016-2019 would need to be changed to accommodate SPACs,” said Christina Lee, a capital markets partner at Baker McKenzie, adding that she had received inquiries from clients, many from mainland China, about listing SPACs in Hong Kong.

DESIGNING RULES

Singapore, which has attracted listings mainly of real estate investment trusts, could find it tougher.

“Singapore doesn’t have as deep liquidity and the velocity of the leading markets and that could be an issue particularly when it comes to the adoption of new investment models,” said Yang Eu Jin, co-head of corporate and capital markets practice at RHTLaw Asia.SGX consulted the market on SPAC listings in 2010 but this didn’t take off due to lack of market interest.

Stefanie Yuen Thio, joint managing partner at TSMP Law in Singapore, said a quick roll out of regulations this year and more interest for SPAC listings for Chinese tech targets, due to the unrest in Hong Kong and U.S.-China tensions, could help Singapore.

“The important thing will be to ensure that our rules are, as far as possible, aligned with U.S. listing rules for SPACs so that Singapore can be seen as the Asian alternative bourse,” she said.

“That may be more of a challenge but if Singapore wants to stay competitive and relevant as a stock exchange, we will need to resist the urge to create a Frankenstein’s monster of the SPAC listing rules.”

Intel to spend $20 billion on U.S. chip plants as CEO challenges Asia dominance

(Reuters) – The move by CEO Pat Gelsinger on Tuesday aims to restore Intel’s reputation after manufacturing stumbles sent shares plunging last year. The strategy will directly challenge the two other companies in the world that can make the most advanced chips, Taiwan’s Semiconductor Manufacturing Co Ltd (TSMC) and Korea’s Samsung Electronics Co Ltd.

And it will aim to tilt a technological balance of power back to the United States and Europe as government leaders on both continents have become concerned about the risks of a concentration of chipmaking in Taiwan given tensions with China.

Intel shares rose 7.5% after the company disclosed its new strategy and full-year financial guidance for 2021. Some investors such as Third Point LLC had previously urged Intel to consider spinning off its costly chip manufacturing operations.

Intel said it expects $72 billion in revenue and adjusted earnings per share of $4.55, compared with analyst estimates of $72.9 billion and $4.77 per share, according to Refinitiv data. The company said it expects to spend $19 billion to $20 billion on capital expenditures.

Gelsinger said that 2021 forecast “reflects the industry-wide shortage” of some components such as substrates.

Intel is one of the few remaining semiconductor companies that both designs and manufactures its own chips. Rival chip designers such as Qualcomm Inc and Apple Inc rely on contract manufacturers.

In an interview with Reuters, Gelsinger said Intel has “fully resolved” its problems with its most recent manufacturing technology and is “all systems go” on chips for 2023. It now plans a massive manufacturing expansion.

That will include spending $20 billion on two new factories at an existing campus in Chandler, Arizona, that will create 3,000 permanent jobs. Intel will then work on future sites in the United States and in Europe, Gelsinger said.

Intel will use those factories to make its own chips but also open them to outside customers in what is called a “foundry” business model in the chip industry. Gelsinger said the new factories will focus on cutting-edge computing chip manufacturing, rather than the older or specialty technologies that some manufacturers such as GlobalFoundries specialize in.

“We are absolutely committed to leading process technology capabilities at scale for the industry, and for our customers,” Gelsinger said, adding that Intel has lined up customers for the new factories but could not disclose their names.

He did say on a webcast Tuesday that Amazon.com Inc, Cisco Systems Inc, Qualcomm Inc and Microsoft Corp support its efforts to offer chip manufacturing services. On a conference call, Gelsinger said that Intel “will pursue customers like Apple.”

The move is a direct challenge to TSMC and Samsung. The two have come to dominate semiconductor manufacturing business, moving its center of gravity from the United States, where much of the technology was once invented, to Asia, where more than two-thirds of advanced chips are now manufactured.

“Intel’s investment will help to preserve U.S. technology innovation and leadership, strengthen U.S. economic and national security, and protect and grow thousands of high-tech, high-wage American jobs,” U.S. Secretary of Commerce Gina Raimondo said in a statement.

Gelsinger said Intel will aim to change the global chip manufacturing balance by embracing the foundry business where it historically has been a minor player. Intel will offer chip customers the ability to license out its own technological crown jewels – known as x86 computing cores – as well as offer to build chips based on technology from Arm Ltd and RISC-V technology from startup SiFive.

“We will be picking our next sites within the next year for U.S. and Europe,” he said.

The American sites could benefit from a $30 billion subsidy package that lawmakers hope to bring to the floor of the U.S. Senate next month. The bill remains largely unwritten, and Gelsinger said on a conference call that Intel’s plan “does not depend on a penny of government support. It is the right strategy for us going forward.”

Intel also announced plans for new research collaboration with IBM focused on computing chip and packaging technology.

But even as Intel jumps into competition with TSMC and Samsung, it also plans to become a larger customer of theirs by turning to them to make subcomponents of its chips called “tiles” to make some chips more cost-effectively.

“I’ll pick the best process technologies wherever they exist,” Gelsinger said. “I leverage internal and external supply chains. I’ll have the best cost structure. That combination of supply, products and costs, we think is a killer combination.”

Intel has given few details of exactly how it will use outside factories, but analyst Patrick Moorhead of Moor Insights and Strategy said he expects Intel to use them as “gap fillers for some of the highest performance” chip parts until Intel can regain a manufacturing lead over its rivals.

In Southeast Asian internet battle, Sea’s rise sends rivals scrambling

In front of an open-air Jakarta restaurant, delivery drivers clad in the orange colours of Southeast Asia tech group Sea Ltd wait for orders next to the green-jacketed riders of market leaders Gojek and Grab, in what has become the latest battleground for tech supremacy in Southeast Asia.

The humble noodles eatery signed up for Sea’s nascent ShopeeFood service a month ago, but “immediately, there were orders everyday,” said manager M.A Rasyid.

Riding on the success of a cash-generating gaming business, U.S.-listed Sea has invested heavily in its Shopee e-commerce brand and successfully taken on Alibaba’s Lazada and other rivals in recent years. Its share price has risen five-fold over the past year, giving the company a market capitalisation of $111 billion.

Now Singapore-based Sea is muscling into food delivery and financial services in Indonesia, the world’s fourth-most-populous country, posing a new threat to regional rivals including ride-hailing and delivery unicorns Grab and GoJek.

At stake is a slice of the more than 400 million internet users in Southeast Asia’s digital economy, which is estimated to triple to $309 billion by 2025, according to a study by Google, Temasek and Bain & Company.

Tech giants including Tencent, a major investor in Sea, Alibaba, Google and Softbank Group Corp are big backers of Southeast Asia’s internet champions.

Sources say Sea’s aggressive expansion is one of the key sources driving merger discussions between Gojek and e-commerce platform Tokopedia. The two Indonesian firms aim to create an $18 billion powerhouse to fight off Sea and regional ride-hailing leader Grab.

Meanwhile, Grab and other players, including travel app Traveloka and Indonesian e-commerce unicorn Bukalapak, are rushing for public listings, hoping to ride the coattails of Sea’s stock rally while defending their turf, according to Reuters interviews with over a dozen people.

“Sea is like Thanos, massive and powerful, and able to take down half of the world, or in this case half the startups,” Willson Cuaca, co-founder of East Ventures and an early backer of Tokopedia, joked as he compared the group to the powerful villain in the Marvel film series.

“Like the Avengers, companies need to band together if they want to ensure their survival and to win the war.”

CASH IS KING

Sea’s stock rally reflects a scarcity of options for investors seeking exposure to the booming Southeast Asia internet sector. It went public in 2017 and has raised some $7 billion in share and debt sales, with early investor Tencent now holding about 20% of the stock.

That investor appetite, combined with a need to raise cash to match Sea’s muscle, is forcing rivals to seek public listings as quickly as they can, bankers and executives familiar with the matter say.

Sources say the Gojek-Tokopedia merger, which is likely to be finalised within weeks, will be followed by a listing in Jakarta in the second half of 2021, then a mega IPO in the United States targeted for 2022.

Grab and Traveloka, for their part, are looking at speeding up the process by merging with special purpose acquisition companies, sources said. Bukalapak is planning the same, after a 2021 Jakarta IPO.

“The market is pretty welcoming for tech stocks. It’s an opportunity for Grab if they are ready for it,” said Jixun Foo, a managing partner at GGV Capital, which has invested in Grab.

COLLISION COURSE

Sea’s success owes much to its online gaming business Garena, whose 2017 title Free Fire became the most downloaded game in the world over the past two years.

It’s using the cash from Garena to repeat its success in e-commerce, food delivery and financial services.

Its Shopee division started off in 2015 as a platform for local sellers and soon gained traction with many merchants regionally. It has now overtaken both Lazada as the top e-commerce player in the region and Tokopedia as the leader in Indonesia, thanks in part to innovations such as adding social features to its service.

Both Gojek and Grab, which have pursued on-again, off-again merger talks with each other for years, believe they can ward off Sea’s move into food delivery thanks to well-honed logistics networks and early-mover advantages.

But they could be hard-pressed to match Sea’s subsidies: in Vietnam, Sea-owned food delivery service Now quietly dominates the sector, according to a January report by advisory firm Momentum Works.

In Indonesia, ShopeeFood is wooing vendors by touting its 80 million-strong user base and promising to subsidise steep discounting.

The next showdown will be in financial services.

Sea has bought Indonesian lender Bank BKE and has hired a veteran of China’s peer-to-peer platforms to head its “SeaMoney” banking efforts.

“SeaMoney can become the Ant Financial of Southeast Asia,” said Daniel Jacobs, managing partner at emerging markets hedge fund Kora, a Sea shareholder.

“After payments, they have the vision and will to grow into adjacent areas, from ‘buy now, pay later’ on the customer side to merchant credit and all sorts of financial services.”

But Gojek and Grab, both of which own part of Indonesian payment app OVO, have similar ambitions. And Sea and Grab are set to square off in Singapore, where both won coveted digital bank licences in December.

Grab is backed by many investors including SoftBank Group and Mitsubishi UFJ Financial Group.

“This is going to be a battle of the titans,” said Patrick Walujo, the co-founder of Indonesian private-equity firm Northstar Group and a Gojek investor.

Asian shares follow Wall St advance as inflation panic eases

Asian stocks were set to track Wall Street gains on Tuesday as bond yields pulled back, easing concerns about inflation although investors are keeping a close eye on rising COVID-19 cases in Europe.

Hong Kong’s Hang Seng index futures rose 0.5%, while Australian stocks were up 0.3%. In Japan, Nikkei futures were 0.8% higher. E-mini futures for the S&P 500 gained 0.06%.

Global equities gained and safe-haven assets rallied on Monday as investors balanced concerns over rising COVID-19 cases in Europe against a break in the recent run-up of bond yields. Shares earlier took a hit from a surprise move by Turkey’s President to replace the central bank governor with a critic of high interest rates.

On Wall Street, the Dow Jones Industrial Average rose 0.32%, the S&P 500 gained 0.70% and the Nasdaq Composite added 1.23%.

Benchmark 10-year notes last rose 15/32 in price to yield 1.6787%, down from 1.732% late on Friday.

“U.S. risk assets were aided by a dip in Treasury yields to start the week. Movements in yields will continue to be closely watched this week amid a series of U.S. Treasury auctions and testimony by Treasury Secretary Yellen and Fed Chair Powell,” ANZ Research said in a daily note.

Federal Reserve Chair Jerome Powell said in remarks prepared for a congressional hearing on Tuesday that the U.S. recovery had progressed “more quickly than generally expected and looks to be strengthening”.

Powell and other Fed officials were expected to make more statements later this week.

Crude oil prices steadied after a sell-off, even as new European coronavirus lockdowns damped hopes of a quick recovery.

Elsewhere in commodities, aluminum prices hit their highest since June 2018 as investors worried Chinese efforts to reduce smelter pollution would curb output.

Global stocks rally as yields ease

NEW YORK (Reuters) – A gauge of global stocks headed for its biggest one-day percentage climb in a week on Tuesday as a fall in U.S. Treasury yields eased concerns the economic recovery could overheat and lead to stronger-than-expected inflation.

U.S. Treasury yields fell with eyes on the $120 billion auctions of 3-, 10- and 30-year Treasuries this week, as a weak 7-year note sale that prompted a spike in yields two weeks ago was followed by another soft auction last week.

Benchmark 10-year notes last rose 15/32 in price to yield 1.542%, from 1.594% late on Monday. The note has topped 1.6% three times since Feb. 25, reaching levels not seen in over a year.

“It is important to put it into context – the 10-year has gone from 1% to 1.60%,” said Andrew Mies, chief investment officer at 6 Meridien in Wichita, Kansas. “If it goes to 2% nobody will be particularly surprised. I don’t think many people would expect it to go to 2.5%.”

On Wall Street, each of the major averages were higher, led by a gain of more than 4% in the Nasdaq, putting the tech-heavy index on track for its biggest one-day percentage rise since April 6 last year when the equity market was in the early stages of recovery from the pandemic-fueled selloff.

The index has been highly susceptible to climbing rates, and Monday’s retreat left it down more than 10% from its Feb. 12 close, confirming what is widely considered to be a correction.

The Dow Jones Industrial Average rose 233.75 points, or 0.74%, to 32,036.19, the S&P 500 gained 77.46 points, or 2.03%, to 3,898.81 and the Nasdaq Composite added 520.45 points, or 4.13%, to 13,129.61.

In Europe, stocks closed higher after extending gains from their best session in four months, a day earlier, as a rise in shares of oil and utility companies helped counter losses in miners.

The pan-European STOXX 600 rose 0.8%, with the utility sector rising more than 1.5%.

Investors will closely watch a European Central Bank meeting later this week for whether policymakers have decided to step up the pace of emergency bond purchases to appease skittish markets.

Data on Tuesday showed the ECB barely nudged up its emergency bond purchases last week even before subtracting debt that matured over that period, raising fresh questions about the central bank’s resolve to curb a bond market sell-off.

MSCI’s gauge of stocks across the globe gained 1.77%.

The speedier rollout of COVID-19 vaccines in some countries and the planned $1.9 trillion U.S. stimulus package helped underpin a brighter global economic outlook, the Organisation for Economic Cooperation and Development (OECD) said, as it raised its 2021 growth forecast to 5.6%.

In foreign exchange markets, the dollar index backed away from a 3-1/2-month high, allowing riskier currencies such as the Aussie and the Kiwi dollar to move higher.

The dollar index fell 0.464%, with the euro up 0.5% to $1.1902.

Oil prices backed off earlier highs in choppy trading, with Brent dipping back to the $68 mark as investors weighed easing concerns over a supply disruption in Saudi Arabia with the likelihood of limited supply from OPEC+ output limits.

U.S. crude futures settled at $64.01 per barrel, down $1.04 or 1.60%. Brent crude futures settled at $67.52 per barrel, down 72 cents or 1.06%.

Gold surged more than 2% on the back of the retreat in U.S. Treasury yields and the weaker dollar, staging a strong recovery from the nine-month low it hit in the previous session.

Spot gold added 2.1% to $1,717.25 an ounce.

U.S. gold futures settled up 2.3% at $1,716.90.

Coronavirus: Bat scientists find new evidence

Scientists say coronaviruses related to Sars-CoV-2 may be circulating in bats across many parts of Asia.

A virus that is a close match to the Sars-CoV-2 virus, which causes Covid-19, has been discovered in bats at a wildlife sanctuary in eastern Thailand.

The researchers predict that related coronaviruses may be present in bats across many Asian nations and regions.

Their discovery extends the area in which related viruses have been found to a distance of 4,800km (2,983 miles).

The area includes Japan, China and Thailand, the researchers said in a report published in Nature Communications.

Writing in the journal, the researchers said the sampling site (Thailand only) and sampling size was limited, but they were confident that coronaviruses “with a high degree of genetic relatedness to Sars-CoV-2 are widely present in bats across many nations and regions in Asia”.

Past studies have suggested that Sars-CoV-2 emerged in an animal, most likely a bat, before spreading to humans.

The precise origins of the virus are unknown and have been investigated by a team commissioned by the World Health Organization (WHO).

In the latest research, a team lead by Lin-Fa Wang of the University of Singapore detected a close relative of Sars-CoV-2 in horseshoe bats kept in an artificial cave at a wildlife sanctuary in Thailand.

The isolated virus, named RacCS203, is a close match to the genetic code of SARS-CoV-2 (exhibiting 91.5% similarity in their genomes). 

It is also closely related to another coronavirus – called RmYN02 – which is found in bats in Yunnan, China, and which shows 93.6% similarity to the genome of Sars-CoV-2.

The researchers, from Thailand, Singapore, China, Australia and the US, looked at antibodies in the bats and in a trafficked pangolin in southern Thailand.

They say the antibodies were able to neutralise the pandemic virus, which is further evidence that SARS-CoV-2-related coronaviruses are circulating in Southeast Asia. 

Prof Martin Hibberd of the London School of Hygiene & Tropical Medicine, who was not involved in the study, said the finding emphasised the broad distribution of the bats and viruses that may include the originator of the current outbreak. 

“Further work is required to understand how Sars-CoV-2 passed from animals to humans, with the recent WHO investigators in Wuhan showing that as of yet, these is no conclusive evidence of how this happened,” he said.

Vietnam economy is Asia’s shining star during Covid

Vietnam has minimised the economic damage from Covid-19 and is the only country in South East Asia on track for growth this year.

Its economy is expected to grow 2.4% this year, according to latest figures from the International Monetary Fund. 

The IMF credited “decisive steps to contain the health and economic fallout from COVID-19” for the country’s success. 

Vietnam has had only 1,288 Covid-19 cases and 35 deaths.

The IMF is predicting a strong economic recovery in 2021, with growth projected to strengthen to 6.5% “as normalisation of domestic and foreign economic activity continues.”

Although Vietnam lacks the health infrastructure of many wealthier countries, it has been widely praised for its public health measures, which quickly brought numbers under control.

It was quick to develop testing kits, and used a combination of strategic testing, aggressive contact tracing to help control numbers.

The country has seen slower growth this year and its once-thriving tourism sector has taken a particularly bad hit, but it has avoided the worst economic effects of the pandemic. 

Work from home windfall

A number of factors have cushioned the blow, according to Michael Kokalari, chief economist for Vinacapital, a Vietnam-focused investment company. 

Perhaps the most unexpected windfall has come from the huge increase in the number of people working from home globally.

“People have bought a new laptop computer or they’ve bought new office furniture, for both working and spending more time at home. Well, a lot of those products are made in Vietnam,” he told the BBC.

Vietnam’s exports to the US have increased by 23% in the first three quarters compared to the same period in 2019, with electronics exports up 26%.

Tariffs woes

Vietnam’s manufacturing sector has grown enormously over the past decade because businesses have started to look elsewhere as labour costs in China increased.

The ongoing US-China trade war has also made China a less attractive place to manufacture, with a number of tariffs in place on exports. 

Many multinationals have started operating in Vietnam, including global technology leaders like Apple and Samsung. 

Apple now has plans to manufacture its high-end Airpods studio earphone in Vietnam. 

The pandemic has also prompted more companies to consider manufacturing there, because of the need to diversify their supply chains, said Mr Kokalari. 

“When Covid comes, you thought you had a global supply chain, and you find out that you only have a China supply chain and you can’t produce. 

Well that’s a much more urgent, emotionally catalysing problem,” he added.