It started out as an uneventful day, with markets hugging close to the zero line, until about 11am when markets like Taiwan moved up sharply, dragging the rest of Asia higher.
This was on the back of rumors of closer China-Taiwan relationship and financial co-operation between the 2 nations. Consequently, Taiwanese banks and other blue chip stocks spiked higher. By midday, the "rumor" was confirmed as Taiwan announced it was sending 13 Cabinet Ministers to China in early July for talks on forging closer relationship. Subsequently, the Taiwan Stock Index posed an intraday high of 6511 or a 5% intraday gain, before succumbing to late profit taking.
In the meantime, this "game-changing" news began to spillover to the other markets. HK and Singapore, in particular, began to share this optimism and traded higher. For me, I found this amusing. I can understand HK (trading higher), but Singapore reacting so favorably to this? In many ways, I have always assumed Taiwan and Singapore to be competitors. And more business for Taiwan must surely be at the expense of Singapore? I guess my stock market friends see things differently. This was the catalyst for them to re-position themselves after so many down days.
Nonetheless, this is an optimism I don't quite share. In the near term, credit markets (void of retail interests) which have proven to lead asset turning points still suggested more risk aversion. I think more market consolidation is needed.
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