Market Wrap MENA-Asia 20 August: Kospi Rebounds 5.9 Percent as Brent Tops 94 Dollars

By The Edge Research Team

Asia rebounded on Thursday almost as hard as it had fallen a day earlier, while most Gulf markets absorbed a sharp escalation in the region’s headlines with little change. South Korea’s Kospi surged 5.89 percent, nearly reversing Wednesday’s 5.80 percent plunge, in a rally that triggered a temporary buy-side halt on program trading, per CNBC, while Brent jumped above 94 dollars after President Donald Trump vowed economic warfare on Iran and the United Arab Emirates said it was suspending trade with Tehran, per CNBC. Egypt’s EGX 30 rose 0.41 percent to snap a three-session slide on the day of the central bank’s scheduled rate decision, which had not been published at the time of writing.

Across Asia, the chip complex that led Wednesday’s rout led Thursday’s recovery. The Kospi closed at 6,852.58, up 5.89 percent, with SK Hynix surging nearly 13 percent a day after saying it would accelerate its 40 trillion won buyback and cancellation programme, and Samsung Electronics up 9.49 percent, per CNBC’s closing report. The Korea Exchange activated a buy-side sidecar, temporarily halting program trading for five minutes after Kospi 200 futures rose more than 5 percent, per CNBC. Japan’s Nikkei 225 rose 1.36 percent to 66,216.79 and the Topix 1.18 percent to 4,059.73, with SoftBank Group and Rakuten each up more than 3 percent, per CNBC. Hong Kong’s Hang Seng added 0.80 percent to 25,698.49 and the Shenzhen Component 0.59 percent to 13,972.78, with the Shanghai Composite up 0.24 percent at 3,903.72 and the CSI 300 up 0.1 percent at 4,592.38, per CNBC. Taiwan’s Weighted Index rose 0.48 percent to 44,933.74, India’s Nifty 50 0.64 percent to 24,231.85 and Australia’s S&P/ASX 200 0.33 percent to 9,083.80, per CNBC, while Singapore’s Straits Times was the only decline among the major Asian benchmarks covered, down 0.39 percent at 5,671.91.

The regional headlines hardened sharply and most Gulf markets held their ground. Trump vowed economic warfare on Iran and threatened financial penalties for its supporters, saying no negotiations were planned, and the United Arab Emirates said it was suspending trade with Tehran, shortly after reporting two missiles had been fired in its direction, an allegation Iran denied, per CNBC. Oil moved on the escalation: ICE Brent for October traded at 94.31 dollars a barrel, up 2.94 percent, and WTI for September at 88.67 dollars, up 3.31 percent, in a snapshot captured around 12:05 GMT, 3:05 pm Kuwait time, per CNBC. Against that backdrop, Abu Dhabi’s FADGI rose 0.69 percent to 10,075.66, per the exchange, and Dubai’s DFM General closed effectively flat, down 0.04 percent at 5,839.53 on 224.5 million shares and 612.9 million dirhams of value, a third straight session of rising volume by our published daily figures. Saudi Arabia’s TASI added 0.26 percent to 10,954.46 after the closing auction on strong breadth of 170 gainers against 90 decliners, with the MSCI Tadawul 30 up 0.28 percent at 1,472.53 and Nomu little changed at 21,571.86, per the Saudi Exchange. Boursa Kuwait’s All-Share was little changed, down 0.03 percent at 8,818.26, with the Main Market up 0.22 percent and the Premier Market down 0.09 percent at 9,239.72, per the exchange, and the Kuwaiti dinar firmed 0.13 percent against the dollar to 0.3067, per CNBC. Qatar’s QE Index posted the Gulf’s steepest decline, down 0.92 percent at 9,682.57. Bahrain’s All Share eased 0.07 percent to 1,943.86, Jordan’s ASE General slipped 0.14 percent to 3,997.24, moving below the 4,000 mark, and Muscat’s MSX 30 fell 0.31 percent to 7,522.85, with 18 gainers against 29 decliners on 35.8 million rials of turnover, per the exchanges.

Egypt turned on decision day. The EGX 30 rose 0.41 percent to 54,737.07, snapping a three-session slide, after dipping to a session low of 54,068.70 and recovering through the afternoon, with the year-to-date gain at 30.86 percent, per the exchange. The Central Bank of Egypt’s Monetary Policy Committee was due to meet Thursday, per the central bank’s published schedule, and its decision had not been published at the time of writing. The pound’s official rate weakened for a third day into the meeting: the Central Bank of Egypt’s rate for 20 August is 50.8140 buy and 50.9534 sell per dollar, about 0.33 percent weaker than Wednesday, our calculation, taking the three-day depreciation to about 1.4 percent.

In the wider market, gold consolidated and Bitcoin extended its run. COMEX gold for December eased 0.44 percent to 4,525.10 dollars an ounce in the same snapshot, per CNBC, after what CNBC described as profit-taking following the prior session’s surge. Bitcoin jumped 4.75 percent to 71,650.75 dollars, per CNBC. The euro was little changed at 1.1679 and sterling up 0.15 percent at 1.3623, with the yen at 158.78 per dollar and the dollar index flat at 98.828, per CNBC. The Cboe Volatility Index closed Wednesday at 14.89, down 6.00 percent, per Cboe, with the US session yet to open on Thursday.

For reference, Wednesday’s closes from our 19 August wrap show Wall Street snapping a three-session slide after the Treasury’s buyback expansion took the official 30-year yield down 9 basis points, with the Russell 2000 leading and London again the only European gainer.

MENA equities, 20 August close, ranked by change

Asia equities, 20 August close, ranked by change

US equities, Wednesday 19 August closes, for reference, ranked by change

Europe equities, Wednesday 19 August closes, for reference, ranked by change

Commodities, intraday 20 August, ranked by change

Currencies, 20 August

US Treasury yields, Wednesday 19 August official curve, for reference, ranked by change

Volatility and crypto

Why it matters: Thursday put a number on how much of Wednesday’s Asian rout may have reflected positioning: a large share of it, our reading. Seoul regained 381 of the 398 points it lost, about 96 percent of the drop, our calculation, with the same two chip stocks that led the fall leading the recovery, and the whipsaw was violent enough to trip the exchange’s program-trading brakes in both directions on consecutive days. The Gulf’s session carries the quieter but larger message: on a day the United Arab Emirates reported missiles fired in its direction and suspended trade with Tehran, Abu Dhabi rose 0.69 percent, Dubai closed flat on a third session of rising volume, and Saudi Arabia gained on breadth of nearly two gainers for every decliner, with Qatar’s 0.92 percent decline the region’s only notable retreat. That is equity investors pricing resilience even as crude priced a larger risk premium, our reading, with Brent above 94 dollars supporting export revenues to the extent that flows remain secure. Egypt’s turn higher on decision day, against a pound that has ceded about 1.4 percent in three sessions, is consistent with investors holding equity risk into the rate decision rather than fleeing it, our reading.

Outlook: The next markers are the Central Bank of Egypt’s rate decision, due Thursday and not yet published at the time of writing, and how the pound’s official rate responds to it, our reading. Beyond Cairo, the tests are whether Seoul’s recovery holds once the sidecar-scale volatility settles, whether Brent extends beyond 94 dollars on the widening economic measures around Iran, and how Friday’s thinner regional session, with the Gulf closed for the weekend, digests whatever Washington and Tehran say next.

Sources: CNBC; Cboe; the US Department of the Treasury; the Saudi Exchange; Boursa Kuwait; Dubai Financial Market; Abu Dhabi Securities Exchange; Muscat Stock Exchange; Bahrain Bourse; Amman Stock Exchange; the Egyptian Exchange; Central Bank of Egypt.

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