2024-01-22 22:07:33
A preview of the day ahead in Asian markets.
The Bank of Japan’s monetary policy decision – and especially Governor Kazuo Ueda’s press conference – is at the center of Asian markets’ concerns this Tuesday, while the collapse of the Chinese and Hong Kong markets continues to worry investors.
While sentiment towards the Chinese economy and markets is clearly deteriorating, the fallout for the rest of Asia may be contained to some extent by the more optimistic mood prevailing globally.
On Monday, the S&P 500 index hit a new record high for the second day in a row, while Japan’s Nikkei 225 index recorded a new 34-year high. This helped limit the decline in Asia on Monday, and the MSCI Asia ex-Japan index slipped 0.6%.
The BOJ is not expected to change its policy, so Ueda’s statement and guidance will be closely scrutinized for when and how the “normalization” process and possible abandonment of negative interest rates will play out this year .
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Recent inflation data has been weak, deflecting pressure on the BOJ to act. As inflation appears to be moving closer to the BOJ’s 2% target, traders are adjusting their rate forecasts and Japanese assets are reacting accordingly.
Stocks are up nearly 10% this month, the yen is nearing the $150.00 area once more, and bond yields are significantly lower than they were a few months ago, although they have been driven higher in recent days by rising global yields.
Investor perspectives on Japan and China are very different. Both countries may be overheated at present, but market dynamics in both countries are strong and showing little sign of reversal.
Stocks in China and Hong Kong fell once more on Monday. China’s CSI300 index skidded 1.6% to its lowest closing level in five years, the Shanghai Composite Index fell 2.7% – its biggest drop since April 2022 – and Hong Kong, the Hang Seng Index fell 2.3% to its lowest level in 14 months.
As expected, the Chinese central bank did not change its interest rates on Monday. But many traders and investors will wonder how much longer policymakers can sit on their hands. The longer they remain inactive, the more likely the fall in stock markets will continue.
Beijing said it would take stronger and more effective measures to support market confidence, state media CCTV reported on Monday, citing a cabinet meeting chaired by Premier Li Qiang.
Also on Monday, China’s major state-owned banks took steps to support the yuan, tightening liquidity in the offshore foreign exchange market while actively selling U.S. dollars in the domestic market as stocks fell, sources told Archyde.com. Archyde.com.
Here are the main developments that might steer markets on Tuesday:
– Japan’s monetary policy decision
– South Korea IPP (December)
– Australian Business Confidence (December)
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