A preview of the day ahead in Asian markets.
Asian investors are heading into the final trading day of the quarter feeling like they have benefited from the double dose of stimulus administered earlier this month by the US Federal Reserve and now by China.
On Sunday, the People’s Bank of China said it would ask banks to cut mortgage rates for existing home loans by Oct. 31. It is expected to reduce existing mortgage rates by about 50 basis points on average.
The measures follow the series of monetary, fiscal and liquidity support measures announced last week – China’s biggest stimulus package since the pandemic – which sparked the most explosive stock market rally in years.
However, Japanese markets could experience turbulence on Monday, as investors react to the announcement of the appointment of former defense minister Shigeru Ishiba as the country’s prime minister.
Ishiba has sharply criticized the Bank of Japan’s aggressive monetary easing in the past, but said on Sunday that policy must remain accommodative as part of a broader trend to support a fragile economic recovery.
The yen jumped nearly 2% on Friday, and Nikkei futures are pointing to a sharp decline when the market opens on Monday.
Markets’ rise on Monday may also be limited as investors close their accounts for the quarter, and ahead of China’s Golden Week holiday which begins on Tuesday.
Monday’s calendar is loaded with major economic indicators, the main ones being official and unofficial data from China’s Purchasing Managers’ Index. Also on the agenda are Japan’s retail sales, industrial production and housing starts, Taiwan’s GDP and South Korea’s retail sales and industrial production.
Chinese markets may be reminded of cold economic reality, with PMI indices from the National Bureau of Statistics expected to show factory activity contracted for the fifth consecutive month in September.
Figures on Friday showed industrial profits fell 17.8% in August, the biggest drop of the year. Citi’s China Economic Surprise Index is hovering around its lowest level in over a year, unlike the US Economic Surprise Index, which is also in negative territory but remains the highest in over one year.
It will take time for Beijing’s stimulus measures to trickle down to hard activity data, so investors may have to continue to endure disappointing numbers in the weeks and months to come.
But the wave of optimism sweeping through the markets is undeniable. The Shanghai All-Star Index rose nearly 16% last week and the Shanghai Composite Index jumped nearly 13%, both representing the biggest weekly gains since November 2008.
Hong Kong’s benchmark Hang Seng Index recorded its biggest weekly rise since 1998, and the fifth in half a century. Real estate values in mainland China, meanwhile, jumped 16%.
Here are the main developments that could steer Asian markets on Monday:
– China’s official and unofficial PMIs (September)
– Taiwan GDP (Q2, final)
– Japan: retail sales, industrial production (August)
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