By Nov 20 (Reuters) – A look at the day ahead in Asian
markets from Jamie McGeever, financial markets columnist.
China’s latest interest rate decision will be the main focus for
Asian markets on Monday, with investors also eyeing
third-quarter GDP from Thailand, and trade figures from Malaysia
and Taiwan.
Trading activity and volumes in Asia this week will be
lighter than usual owing to the U.S. Thanksgiving holiday later
in the week, but sentiment appears to be holding up well thanks
to a general loosening of financial conditions.
Bond yields around the world, led by Treasury yields, are
falling as inflation pressures ease, economic activity cools and
oil prices slide.
For the most part, investors are riding the wave – world
stocks, Wall Street, and Japan’s Nikkei last week all rose for a
third straight week, and Asia ex-Japan rose 3%. China’s blue
chip CSI300 index, however, had its first fall in four weeks.
Equity and currency market volatility are well anchored, and
while bond market volatility is more elevated, it is in the
middle of its range over the past year excluding the U.S.
banking shock in March.
On Monday, the People’s Bank of China is widely expected to
leave lending benchmark rates unchanged. All 26 market watchers
in a Reuters poll expect the one-year and five-year loan prime
rates to be held steady at 3.45% and 4.20%, respectively.
Most economists believe China’s economy needs more stimulus,
but this would expand downward pressure on the yuan and risk
increasing capital and portfolio outflows.
Goldman Sachs analysts estimate that net FX outflows in
October totaled $41 billion, compared with $75 billion in
September. That’s over $100 billion outflows in just two months.
It is why Beijing’s policy decisions are so important: as
long as the interest rate spread remains heavily against the
Chinese yuan, these outflows will likely persist.
But authorities seem determined to support the yuan and
steer it away from the 7.30 per dollar level. Their efforts are
working – the dollar on Friday dipped below 7.21 yuan for the
first time in three months.
Also on Monday, figures from Bangkok are expected to show
that Thailand’s economy grew at a 2.4% annual rate in the third
quarter, up from 1.8% in the previous quarter, boosted by
exports and tourism. On a quarterly basis, GDP likely grew a
seasonally-adjusted 1.2% from 0.2% in the second quarter.
Later in the week the Reserve Bank of Australia releases
minutes of its Nov. 7 policy meeting and Bank Indonesia is
expected to keep its key interest rate on hold at 6.00%. But
perhaps the most important release will be Japanese consumer
price inflation on Friday – it could be critical for Bank of
Japan policy.
Core annual inflation is expected to have risen to 3.0% in
October from a 13-month low of 2.8% in September, according to a
Reuters poll.
Here are key developments that could provide more direction
to markets on Monday:
– China interest rate decision
– Thailand GDP (Q3)
– Malaysia trade (October)
(By Jamie McGeever; Editing by Diane Craft)
