Where are we with Asian indices?

The start of 2017 had been the boom for Asian markets. While President Trump wasted little time signing orders for the withdrawal from the TPP agreement, the verdict on China had been left without proper address. This vacuum had given Asian markets further room to run and the rally itself had also been underpinned by the lift in regional economic conditions. A standard measure of purchasing managers' index (PMI) by IHS Markit, cutting across Asia, had found that most sectors showed an accelerated increase in output into February. This increase in output has also managed to translate to better trade figures for the region, lifting the outlook for regional equities.

A check at the start of March finds key Asian indices with substantial gains, led by the local Straits Times Index (STI). At IG, the Singapore Blue Chip, with the MSCI Singapore index as the underlying index, had clocked more than 7.0% gains since the start of the year, departing from the directionless trade in 2016. This clearly exhibits the positive sentiment found in regional markets. 

The key question for Asian indices moving forward will be how much further the markets can run. Classifying the drivers into opportunities and risks, it may appear that the opportunities outweighs the risks that have yet to be realised at the moment.

On one hand, it is undeniable that we are seeing a pickup in economic conditions in the region such as via the abovementioned. On the other hand, trade concerns continue to loom above our heads for Asia, especially with Trump-induced uncertainties still apparent. Other latent risks in the region includes a return to the slow growth outlook and the threat of capital outflows should the Fed significantly increase the pace at which they raise interest rates.

That said, the growth outlook certainly appear to be rosier at the moment and places the bias on the upside. A re-evaluation of the markets past mid-year may nevertheless be warranted with analysts yet to be convinced to significantly raise growth forecasts. 

Technical Analysis

Nikkei has largely been range bound at the moment with USD/JPY playing ping-pong between $112 and $115. Eye a break for both the USD/JPY and correspondingly the 19,700 resistance for the index. 

Weekly chart for the HSI finds the 24,000 psychological level a tough resistance to break. Near term trades may see some bearish divergence but the broad uptrend is likely to bring prices up to retest the level. 

The Singapore Blue Chip has broken out strongly from the resistance at 335 at the start of the year. However, in line with related markets above, the index finds resistance ahead of 350. Eye a clear breakout for entry.