By Jamie McGeever
(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.
Asia is set to begin this week much like it ended the previous week, with a surge of positivity in risk assets and investor sentiment. This surge is driven by growing confidence in the U.S. economic ‘soft landing’ and the easing of financial conditions due to the decline in the dollar and U.S. bond yields.
This week’s regional economic and policy events calendar is packed with top-tier releases that are bound to have a significant impact on local assets, particularly from China.
On Tuesday, October’s import and export figures will be released, followed by the release of bank lending and credit, money supply, producer price inflation, and consumer price inflation on Thursday. These releases will provide a clearer picture of how China’s economy is faring at the start of the fourth quarter.
Elsewhere in Asia, the key economic indicators to watch this week are the latest consumer inflation readings from Thailand, the Philippines, and Taiwan, as well as the third quarter GDP figures from the Philippines, Hong Kong, and Indonesia.
Indonesian GDP figures and Thai inflation figures will be released on Monday. The Reuters poll suggests that Indonesia’s quarter-on-quarter growth rate will more than halve to 1.71% from 3.86%, while annual growth is expected to remain slightly above 5%.
Last week, the rupiah halted an eight-week losing streak and recovered from a three-and-a-half-year low of almost 16,000 per dollar.
On the other hand, the Thai baht experienced a notable 1.5% rally on Friday, strengthening against the dollar. Further improvements in inflation could lead the Thai baht to move away from the one-year low it reached last month.
The regional highlight of the week on the policy front is the Reserve Bank of Australia’s rate decision, taking place on Tuesday. Economists surveyed by Reuters anticipate a 25 basis points increase in the benchmark cash rate to 4.35%, as inflation surprisingly remains strong.
Additionally, on Tuesday, the Bank of Korea will publish the minutes from its last policy meeting, and on Thursday, the Bank of Japan will release a summary of board members’ opinions from its October 30 to 31 policy meeting.
This week will witness a flurry of Japanese corporate earnings, with particular attention on banks and financial firms due to the ongoing policy shift of the Bank of Japan. With the yen still weak around 150 per dollar, it will be interesting to see if the Nikkei can reach its recent 33-year high again.
While Asian and emerging stocks had their best weeks since July, posting gains of around 3% last week, they lagged behind their U.S. and global counterparts, which gained 5% or more.
Considering the significant decline in the dollar and Treasury yields on Friday, there is potential for Asian and emerging markets to catch up and even outperform this week.
Here are the key developments that could provide more direction to the markets on Monday:
– Indonesia GDP (Q3)
– Thailand CPI inflation (October)
– Japan services, composite PMIs (October)
(By Jamie McGeever; Editing by Josie Kao)
