With the MSCI World, Japanese Nikkei 225, Nasdaq, S&P 500 and Europe’s STOXX 600 indexes all finishing last week at record highs, Asian markets kick off the new week on Monday with a strong global tailwind behind them. The resilience of the U.S. economy, cooling inflation and an artificial intelligence-fueled frenzy in big tech are setting the positive tone globally, which should put a spring in Asian markets’ step on Monday.
Industrial production, retail sales and purchasing managers’ index data from South Korea; New Zealand trade and Australian housing figures are the main events on the regional economic calendar, but investors’ attention will be turning to China. The annual National People’s Congress in Beijing opens on Tuesday and what is laid out by parliament could go a long way to determining the 2024 path for assets in China. And beyond.
Premier Li Qiang will lay out Beijing’s annual growth and other economic targets, and – crucially – a plan for achieving them.
Li is expected to set a growth target of around 5% for 2024 – the same as last year – to keep China on a path toward President Xi Jinping’s goal of roughly doubling the economy by 2035.
If the stimulus policies and measures are deemed credible by investors, the recent rebound in Chinese stocks from the five-year lows observed a few weeks ago seems likely to persist. However, if these policies fail to convince investors, there’s a possibility of a re-test of these lows in the coming weeks.
Chinese leaders are facing mounting pressure to implement more drastic measures to bolster the property sector, combat deflationary pressures, and reignite growth. Nonetheless, capital outflows have exerted downward pressure on the exchange rate, and extensive fiscal easing could exacerbate this outflow, leading to a concerning decline in the currency.
Despite these challenges, some recent economic indicators have shown promise. Last week’s Caixin manufacturing PMI was sufficient to elevate China’s overall economic surprises index to its highest level since mid-December.
It’s important to note that expectations have been significantly tempered in recent weeks due to underwhelming data, so the uptick in economic surprises may not necessarily indicate robust economic activity. Nevertheless, positive surprises are generally preferable to negative ones.
Chinese equities have indeed rebounded, showing a gain of approximately 10% from the recent lows and pushing into positive territory for the year.
Turning our attention to the upcoming week in Asia, several key economic indicators and events are on the calendar:
- Inflation data from South Korea, Thailand, the Philippines, and Taiwan will be closely watched.
- GDP figures from South Korea and Australia will provide insights into the economic performance of these countries.
- China’s Caixin services PMI will offer an indication of the health of the services sector, a crucial component of China’s economy.
- Malaysia’s interest rate decision will be of interest to investors, as it signals the monetary policy stance of the country.
Additionally, on Monday, the following developments could influence market direction:
- South Korea will release retail sales, industrial output, and manufacturing PMI data, providing insights into the country’s economic activity.
- Australia’s housing sector data will shed light on trends in the housing market.
- New Zealand’s trade data will offer insights into the country’s trade balance and export performance.
These key events and developments will likely provide further direction to Asian markets as the week progresses.