Singapore slump, China tensions weigh as Covid cases surge

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BENGALURU (July 14): Asia's emerging markets recovered from session lows on Tuesday, as US stocks futures steadied in early trading, but a continued spike in global coronavirus infections and diplomatic tensions between China and the United States kept a lid on gains.

Shares in Singapore edged down 0.2% after losing as much as 1% earlier, with gains in the consumer sector countering weakness in real estate and banking stocks, following data showing a 41% plunge in second quarter gross domestic product. 

"Finance companies are particularly hit hard by the GDP data, because of what it means for longer-term yields. Doubts over economic health can shrink returns banks make from loans," said Daniel Dubrovsky, an analyst with DailyFX. 

Yields on Singapore's 30-year government bonds fell about 1.8 basis points to 1.228%. They are still up around 16 basis points since late May. 

While Singapore's debt market is often perceived as a safe haven for capital, demand for its government bonds has dried up, as investors sought out higher yields in other Southeast Asian markets including Indonesia and the Philippines.

South Korean shares gave up early losses to end marginally lower, while Thai shares also regained some ground from a 1.2% drop earlier in the day.

Asian markets had taken their early lead from a selloff on Wall Street overnight, which accelerated on news of new restrictions in California and growing tensions between Washington and Beijing over territorial claims in the South China Sea.

Worries over an economic rebound bogged down Indian shares, which fell over 1.5% as many states and cities tightened restrictions again, following a surge in domestic coronavirus cases.

The rupee weakened 0.3% against the dollar.

The Taiwan dollar was the sole outlier among Asian currencies, gaining 0.4% against the greenback. 
Taiwan's financial regulator held an emergency meeting last week with major banks to discuss the soaring currency due to concern from exporters and the highest levels of government, sources with direct knowledge told Reuters.

The currency has strengthened 2.1% against the US dollar this year, with the central bank intervening daily to try and prevent it rising further, according to bankers.