By Jamie McGeever
(Portal) – A look ahead for the day ahead in Asian markets by Jamie McGeever.
What the Fed takes away, China could give back.
Speculation is mounting that China may soon make significant changes to its zero-COVID policy and begin reopening the economy. Chinese asset prices were on fire late last week and the glow is expected to continue burning brightly into Monday.
Wall Street’s strong close on Friday should also help, but this rally could be vulnerable – the Fed isn’t reversing anytime soon, implied final rates are now above 5%, yield curve inversion is relentless and an earnings slowdown next year is very likely.
Could a Chinese focus on COVID replace the Fed’s elusive focus on interest rates for investors and spark a year-end rebound in global markets? Some of the moves in China and Hong Kong over the past week have been notable.
Shanghai shares up 6.4%, biggest weekly gain since July 2020; Hong Kong’s Hang Seng rose 8.7%, its best week in 11 years, and the Chinese yuan on Friday posted its biggest rise against the dollar since the currency’s one-off revaluation in 2005.
(GRAPHIC China Stocks: https://fingfx.thomsonreuters.com/gfx/mkt/gdpzqreolvw/One.PNG)
A global banking summit in Hong Kong last week revealed pent-up appetite for investment in China. “The risk/reward trade-off is still attractive because China’s reopening of trade operations is a long-term move,” Morgan Stanley analysts said.
China is also in the economic data spotlight on Monday as Beijing releases its October trade and foreign exchange reserve figures. Trading activity is expected to slow and foreign exchange reserves, already at their lowest in five and a half years, to fall closer to $3 trillion.
Three key developments that could give markets more direction on Monday:
China Trade Balance, Foreign Exchange Reserves (October)
Trade Balance India (October)
Current account Germany (September)
(Reporting by Jamie McGeever in Orlando, Fla.; Editing by Lisa Shumaker)