Asian stocks lack direction

While the US was closed for Martin Luther King Day, yesterday, Asian markets had to contend with China’s economic data and the weak-end to European trading. Asian equity markets are likely to be mixed and muted in today’s trading as well.

China’s GDP, manufacturing and retail sales data confirmed suspicion of a slowdown. There are many research reports touting the structural challenges of the country such as, high debt-to-GDP ratio, slowing industrial output and the tighter investment spending.

Although, speaking to businesses in China did provide evidence that not all is negative. After decades of double-digit growth, there is an urgent need to address the problems created from pollution and the local government debt. This scenario is similar to the start of last-year, there has been an adjustment to the low-side on where Chinese growth will be for the rest of the year.

As for the rest of Asia, Thailand’s political unrest continues to spiral downwards due to the increasing violence. The latest grenade attack has prompted calls for a possible military coup. Prime Minister Ying luck Shinawatra’s party has control of the rural areas, while opposition leader Suthep Thaugsuban has support from the middle-class in Bangkok.

This means the opposition leader will not be able to win the election that Yingluck has called for next month. It would be fair to conclude that the situation does not appear to be anywhere near a resolution. Despite the resilience of the baht and SET so far, prolonged unrest will eventually affect the financial markets in adversely. At the start of the year, there were foreign fund inflows entering Thailand’s equity markets, the latest data showed a net negative of -$19.6m for the month as at 20 January.

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