A preview of the day ahead in Asian markets.
The last trading week of the first half of the year begins this Monday. Asia’s scorecard looks reasonably positive from an equity perspective, mixed from a currency and bond perspective, and dimmer from a China market perspective.
Chinese stocks will look to halt the rot and end the recent decline that has prolonged their underperformance against regional and global peers this year.
Investors in Japanese assets, meanwhile, are on alert after the yen fell for the seventh straight day on Friday towards 160.00 per dollar, the level that triggered Tokyo’s first foray into the market almost two months ago.
With the Bank of Japan’s next monetary policy meeting not taking place until July 30-31, further verbal or direct intervention may be necessary to halt the yen’s fall. The summary of opinions from the BOJ’s June 13-14 monetary policy meeting, which will be released on Monday, will be closely followed.
Monday’s regional calendar also includes the latest trade figures in New Zealand, inflation in Singapore, and unemployment and industrial production in Taiwan.
Asian stocks head into the final week of June in good shape, supported by moderate volatility and falling inflation globally, lower U.S. bond yields and buoyant stocks around the world.
However, as the end of the first half approaches, some investors will want to lock in profits and take positions. The fall in Nvidia’s shares last week – their first weekly decline in nine years – could be a sign of how this week will play out.
Japanese stocks are up about 15% year to date, and the MSCI Asia ex-Japan, India’s Sensex and South Korea’s Kospi are all up about 7%.
China is an exception.
The Shanghai Composite is barely in positive territory for the year, has lost 5% over the past month and is experiencing its worst run of weekly losses in six years.
The news flow is not particularly encouraging – trade tensions between China and the West are increasing by the day, it seems, and on Friday Washington released draft rules aimed at banning or requiring the notification of certain investments in artificial intelligence and other technology sectors in China.
Capital flows are not particularly favorable either. Foreign direct investment in China between January and May fell 28% to $49.7 billion from the same period last year, and some $4.5 billion left mainland China this month. this via the northern leg of the Stock Connect Scheme, ending four months of net inflows.
However, analysts at Barclays say the decline is exaggerated and that the bar is low for positive market-friendly surprises at next month’s “plenum”, a key meeting of the Communist Party’s central committee. They recommend positioning yourself for a rebound.
Here are the main developments that could move the markets on Monday:
– Summary of opinions from the June BOJ meeting
– Inflation in Singapore (May)
– Industrial production of Taiwan (May)
