2024-01-21 21:45:00
A preview of the day ahead in Asian markets.
A decision on China’s interest rates will open the week in Asia on Monday, with investors hoping – perhaps half-heartedly – that the central bank will provide much-needed relief to the country’s sluggish economy and creaking markets.
This decision will be followed the next day by that of the Bank of Japan – an equally anticipated event, but for different reasons – meaning that trading activity and volume should start the week on a good note.
Transaction activity and volume should therefore start the week on a positive note, particularly in the foreign exchange market.
The Chinese yuan and the Japanese yen enter their respective central bank meetings on the defensive once morest the dollar. Last week, the yuan hit a two-month low and the yen’s year-to-date losses reached 5%.
Indeed, of the nine Asian currencies, only the Indian rupee is up once morest the dollar this year. And even then, it’s only by a hair.
The dollar is also up once morest each of its competing G10 currencies, although the Fed is still expected to cut rates more than any other major central bank in the world this year, despite the recent decline.
Asian stocks should have some resilience on Monday, following the S&P 500 hit a new all-time high on Friday.
The rise in global stocks was sparked by Taiwanese chipmaker Taiwan Semiconductor Manufacturing (TSMC), the world’s largest contract chipmaker. On Thursday, it forecast revenue growth of more than 20% in 2024 thanks to the explosion in demand for high-end chips used in artificial intelligence.
The MSCI Asia-Pacific index excluding Japan rose more than 1% on Friday, but still fell for the third consecutive week and has lost more than 5% since the start of the year.
Chinese stocks are at five-year lows, foreigners are withdrawing their money from the country and the yuan is falling. Beijing is eager to act, but nervous regarding the debt and currency risks associated with further stimulus measures.
On Monday, the central bank is expected to leave the benchmark one- and five-year prime rates (LPR) unchanged at 3.45% and 4.20%, respectively. A new disappointment for investors, or is this already integrated into the price of money and stocks?
Meanwhile, the BOJ is also expected to leave policy unchanged on Tuesday, and as inflation continues to move closer to the BOJ’s 2% target, pressure to “normalize” policy and reverse negative interest rates builds. attenuates.
The yen is on the defensive and, despite an understandable wave of profit-taking following hitting 34-year highs, Japanese stocks might move higher on Monday.
Other key events on the Asia/Pacific economic and political calendar this week include South Korean GDP, inflation in Tokyo, an interest rate decision in Malaysia and inflation figures at consumption in New Zealand, Vietnam, Singapore, Hong Kong and Malaysia.
Here are the main developments that might steer markets on Monday:
– Decision on interest rates in China
– CPI inflation in Malaysia (December)
– Hong Kong CPI inflation (December)
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