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The absence of Chinese volatility has an apparent impact on markets in Asia. Regional bourses were broadly higher for much of the session. The strong rebound from overnight US markets also contributed to the better risk appetite.
Fears however limited further rallies. Beijing has done well to supress selling pressure, by buying large stocks in run up to the Victory Day long weekend. How the markets perform next Monday when China reopens is now at the back of investors’ minds now. I get the sense that there are many concerns over this, and the broader sentiment is perhaps still negatively bias.
This is clearly so if there are no state buying support next week. For the moment, the general mood is risk-on cautiously. This is apt as traders eyeing long positions will have to be careful not to get caught up in the ongoing recovery, but wait for a clearer trend is emerged. This means tomorrow’s trade is expected to be more or less what we have seen today – modest demand in risky assets.
Major currencies see subdued action
Meanwhile, trade in the major currencies was subdued. The US dollar index remained tight within 95.8-96.0. Correspondingly, USD/JPY and EUR/USD were little changed, trading at low-120 and low-1.12 region during the Asian session.
Antipodean currencies also saw little action, with AUD trading near to 0.70 while NZD was seen at mid-0.63. A narrowing Australian trade deficit helped provide some support to the Aussie, as the anticipated poor GDP data may not be so bad.
In Asia, ringgit heads lower. USD/MYR rose above 4.24 on demand from Malaysian companies. Low volume might have also pushed up the pair. Prime Minister Najib’s predicament just got more entrenched, after the high court ordered him to defend the suit brought by the opposition regarding overspending in the 2013 election campaign. Ongoing political undercurrents continue to pressure the Malaysian ringgit.
Meanwhile, the Korean won weakened against the USD amid concerns over economic growth. USD/KRW rose past 1190.
As the political party rallies began in earnest yesterday, the Straits Times Index (STI) also has a bit of a rally itself today, rebounding past 2900 as of 4.52pm, in line with regional equity performance. The banking stocks continued to move higher, while about two-third of the STI constituents posted gains at last check.
As mentioned yesterday, investors will likely look to US stock performance for guidance on how to trade the Singapore market, as China markets are closed for the rest of the week. As such, we could see more upward momentum if US stocks extend their Wednesday gains tonight. US stock index futures are looking up in late Asia.
Nikkei Singapore PMI eased to 50.8 for August from 51.3 previously, dragged by lower manufacturing output. A positive bright spot however was that new orders rose from the previous month. Sustained increase in new orders over the coming months would point towards a pick up in the manufacturing sector in Singapore.
Focus will now turn to the ECB meeting later today, where market participants will be watching for hints of more easing measures from the European central bank, as inflation remained below target.