Asia-Pacific Markets Rally as Key Events Loom in U.S. and China

Source: icmarkets.com

Investor Sentiment Boosted by Upcoming Events

Asia-Pacific markets experienced a notable upswing on Monday as investors positioned themselves for a week filled with significant events, including the U.S. presidential election and the Federal Reserve’s monetary policy meeting. This optimism is compounded by anticipation surrounding China’s parliamentary meeting, which is set to begin today and is expected to yield further details on fiscal support measures by Friday.

China’s Trade Data and Inflation Outlook

Investors are particularly keen on the release of China’s October trade data, scheduled for Thursday. This comes after disappointing growth in both exports and imports during September. Additionally, South Korea is set to announce its consumer inflation figures for October on Tuesday, with forecasts indicating a potential decline for the third consecutive month to 1.4% year on year, down from 2.6% in July, 2.0% in August, and 1.6% in September.

On the same day, the Reserve Bank of Australia will reveal its decision on interest rates. Analysts predict that the central bank will maintain the official cash rate at 4.35%, based on a recent poll of economists.

Mixed Market Performances Across the Region

Japan’s markets remained closed on Monday due to a holiday, while South Korea saw its blue-chip Kospi index rise by 1.54% and the smaller Kosdaq gain by 3.19%. Hong Kong’s Hang Seng index recorded a slight increase of 0.1%, and mainland China’s market CSI 300 climbed by 0.7%. In Australia, the S&P/ASX 200 inched up by 0.6%, while Taiwan’s Weighted Index advanced by 0.5%.

In the U.S., stock futures painted a different picture, dipping slightly. Futures linked to the Dow Jones Industrial Average fell by 0.3%, while those for the S&P 500 and Nasdaq-100 dropped by 0.25% and 0.3%, respectively.

Oil Prices Surge as OPEC+ Delays Output Increase

In commodity markets, U.S. crude futures surged by over 1% on Monday following an announcement from OPEC+ members to postpone a planned output increase from December to January. West Texas Intermediate rose 1.42% to $70.47 per barrel, while Brent crude climbed by 1.37% to $74.10.

China Eases Foreign Investment Rules

In a bid to attract more foreign capital, China’s market has reduced the capital requirement for non-controlling foreign shareholders in listed firms from $100 million to $50 million. This change, announced by the Ministry of Commerce and the China Securities Regulatory Commission, also allows foreign individuals to engage in strategic investments in Chinese companies. The revised measures are aimed at lowering barriers for foreign investors and promoting long-term investments.

Optimistic Outlook for Chinese Equities

Goldman Sachs has expressed a bullish outlook for Chinese equities, predicting a potential rise of about 20% over the next year for shares listed in both Hong Kong and mainland China. The firm emphasized a preference for A-shares over H-shares and noted that the results of the U.S. elections could significantly impact China’s market, particularly concerning tariff risks. They forecast that an increase in tariffs could potentially reduce China’s market GDP growth by 20 basis points next year.

Investor enthusiasm for Chinese equities has waned following a strong performance in September, where the benchmark CSI 300 saw gains of over 20%. However, data indicates that the index has recorded a 3% decline for October.

Fiscal Support Needed for Debt Stability

Prominent economic advisor Li Daokui has indicated that China may require a fiscal package ranging from 20 trillion to 30 trillion yuan (approximately $2.82 trillion to $4.23 trillion) to stabilize local government debts. He highlighted that China’s general government debt stood at 77% of its GDP in 2022, considerably lower than that of Japan and the U.S. Reports suggest that China is considering over 10 trillion yuan in additional debt issuance. However, Li asserts that this amount falls short of what is necessary.

As markets adjust to these developments, all eyes remain on the outcomes of the U.S. presidential election and the subsequent implications for global markets.