Before the bell: bargain hunting on Wall Street and Asian markets

Pessimism in equity markets has given way to new records. Technology stocks are in demand in both Hong Kong and Tokyo.

With a surge to 7,022.95 points, the S&P 500 (+0.8%) reached a new record high. Since its low on 30 March, the index has already gained 10.7%. The Nasdaq (+1.6%) performed even better, closing at a record level of 24,016 points. Since 30 March, the technology index has risen by 16.1%. It was a bad day for Live Nation Entertainment (-6.3%). A jury in New York confirmed what many already suspected: the concert organiser and ticket seller abuses its monopoly to charge excessively high ticket prices. Bank of America (+1.8%) and Morgan Stanley (+4.5%) were rewarded for strong quarterly results. European markets lagged behind. In Frankfurt, the index managed a modest gain of 0.1%, but the fifty stocks in the Euro Stoxx 50 declined by an average of 0.7%. In Brussels, the Bel20 lost 0.2%, with larger declines for Ageas (-1.7%),Ackermans & van Haaren (-1.7%) and UCB (-1.8%). At ASML (-4.2%), profit-taking occurred as expected following the announcement of strong results.

Unlike European markets, Asian equities are following Wall Street’s lead. In Tokyo, the Topix and the Nikkei rise 1% and 2% respectively this morning. TDK (+12.3%), Daikin Industries (+10.5%) and SoftBank Group (+5.2%) are leading the gains. In Hong Kong, the Hang Seng climbs 1.4%. Baidu rises 8.4%, while Alibaba and BYD both gain 4.6%. Today brings results from Taiwan Semiconductor Manufacturing Company, Netflix, PepsiCo, Barry Callebaut, Fastned and Basic-Fit. In Brussels, Wereldhave Belgium and Econocom report figures. Kering (-9.3%) hosts an analyst day.

Pessimism in the (Alpheus) valley

In the Spamalot of 28 March, we shared our views on the wave of doom-laden messages coming out of Kinepolis that day. On the website of De Tijd, we read: “Buy recommendations? The storm is yet to come!”, “Do not buy the dip.”, “The VFB happening was dominated by gloomy forecasts.” and “Be very cautious as an investor. Increase the bond portion of your portfolio. Hold cash. Growth is stalling.” Yet since 30 March, the S&P 500 and Nasdaq have gained 10.7% and 16.1% respectively. Imagine having sold. Spaarvarkens know better. We also understand that markets will occasionally decline sharply. That is necessary. Excess needs to be flushed out so that fundamentals can strengthen. Every disadvantage has its advantage. Every crisis creates opportunities.

All the Chinese

Beijing announced this morning that China’s economy accelerated to 5% year-on-year growth in the first quarter. In the previous quarter, growth was “only” 4.5%. So much for the supposed collapse of the Chinese economy. Let’s be honest: was 4.5% growth really that disappointing for the world’s second-largest economy? Yesterday, I read on X: “The Chinese electric vehicle fairy tale is collapsing: barely profitable, subsidies drying up, Evergrande 2.0.” I would not worry too much about China or its economic growth. If there is a risk for investors, it is that China is being underestimated. Did you know that, despite the real estate crisis, Chinese households still hold a savings surplus of no less than 51,000 billion dollar? Part of that capital will eventually find its way into Chinese equities.

Did you know…

that Mark Mobius passed away yesterday at the age of 89? The fund manager was best known as a pioneer of investing in emerging markets and worked at Franklin Templeton from 1987 to 2018.

This article was translated from Dutch and was originally published on Spaarvarkens.be.