2023-06-18 21:45:00
Jamie McGeever, Financial Markets Columnist, outlines Asian markets for the day ahead.
Asian markets will be lighter than usual on Monday, with no major regional economic data expected and US markets closed. Investors will therefore be preparing for the first major event of the week on Tuesday: the decision on interest rates in China.
The People’s Bank of China is expected to cut its one- and five-year lending rates by 10 basis points to 3.55% and 4.20%, respectively, in its latest attempt to prop up China’s faltering economy and steer it away from recession. deflation.
Earlier this month, the PBOC cut its key medium-term rate for the first time in ten months, paving the way for cuts to benchmark LPR rates and bucking the global trend of higher rates. to bring inflation back to policy makers’ targets.
It’s no surprise that the yuan is under heavy selling pressure – it’s lost 4% in the past two months and is at its lowest level in seven months. Looser monetary policy will do little to reverse this dynamic.
On Monday, investors might also watch the results of the visit to Beijing by US Secretary of State Antony Blinken, the first senior US diplomat to visit China in five years, amid frosty bilateral relations and dim prospects for China. progress on the long list of disputes between the world’s two largest economies.
Beyond China, investors must digest two other monetary policy decisions in Asia this week: that of Bank Indonesia (BI) and that of the Philippines’ Bangko Sentral ng Pilipinas (BSP) on Thursday.
Both are expected to leave their policies unchanged, with BI maintaining its benchmark lending rate at 5.75% and BSP its policy rate at 6.25%.
The overall tone for the Asian market on Monday might be one of caution as investors are tempted to take profits on the recent rally. Japanese stocks jumped 20% in two months and are at a 33-year high, while the MSCI Asia ex-Japan index jumped 3% last week, its best week since January.
Other market-changing events in the region later in the week include Japanese consumer price inflation data for May on Friday. The annual core CPI rate is expected to decline to 3.1% from 3.4% in April.
The Bank of Japan last week left its ultra-free policy unchanged and signaled it was in no rush to change its dovish stance, even though inflation has since topped the BOJ’s 2% target. more than a year.
Compared to the more expansionary stance of the world’s other major central banks, it’s no surprise the yen is on the defensive – on Friday it hit a 15-year low once morest to the euro.
Here are the key developments that might guide markets on Monday:
– Bank of Korea Governor Rhee Chang-yong speaks
– US Secretary of State Antony Blinken in China
– Unemployment in Hong Kong (May)
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