China reopens in a big way By Reuters

©Reuters. FILE PHOTO: A passerby walks past an electric monitor showing the stock price index of various countries outside a bank in Tokyo, Japan, March 22, 2023. REUTERS/Issei Kato/File Photo

By Jamie McGeever

(Reuters) – A look ahead on Asian markets.

Chinese markets open Monday after the Lunar New Year holiday, with investors hoping that last week’s positive momentum across the region can continue despite signs that U.S. inflation, and therefore interest rates, may be stickier expected.

Asian stocks are performing well: the MSCI Asia & Pacific ex-Japan index last week recorded its best week of the year, a gain of 2%, and its longest weekly winning streak in more than a year. four-week year up. a row.

Was it a coincidence that China was closed? Investors will be able to draw their conclusions on Monday, when China reopens trading.

There are signs that China’s depression may be easing, if only temporarily. Stocks have rebounded from five-year lows and official data on Sunday showed tourism revenues during the Lunar New Year holiday surpassed pre-COVID levels.

The data will offer relief to policymakers battling slowing growth, deflation risks, weak consumer demand and a collapsing real estate sector, even as the sustainability of the tourism boost remains uncertain.

China’s central bank on Sunday left its key rate unchanged as expected when maturing medium-term loans are rolled over, indicating that key lending rates will also be kept unchanged at the end of this week.

Beijing is performing a delicate balancing act to support the economy at a time when signs of persistent deflationary pressures require more stimulus. But aggressive easing risks reigniting depreciation pressure on the yuan and capital outflows.

Surprisingly positive data on producer and consumer price inflation in the United States last week pushed up Treasury yields, strengthened the dollar and raised questions about how much the Fed will cut rates this year. Is a second wave of inflation forming?

This general tightening of financial conditions could dampen any optimism in Asian market trading on Monday. Goldman Sachs’ emerging market financial conditions index hit its highest level in three months last week.

The boom in Japanese markets, meanwhile, shows no signs of abating. Last week it grew 4.3% and this year it is up 15%, supported by growing optimism about Japanese corporate earnings prospects and a very weak currency.

With the Nikkei just a few hundred points away from new all-time highs, the market is likely ripe for profit taking. But if the dollar holds above 150 yen and launches another test of its recent 33-year peak around 152 yen, a new record is on the cards.

Highlights on Monday’s Asian economic calendar will include Thailand’s fourth-quarter GDP and machinery orders from Japan. Data on China’s foreign direct investment may also be released.

Interest rate decisions in South Korea and Indonesia, a spate of PMI reports from across the continent and Reserve Bank of Australia meeting minutes will help set the tone later in the week.

Here are some key developments that could provide more guidance to markets on Monday:

– Thailand GDP (4th quarter)

– Trade with Thailand (January)

– Machinery orders from Japan (December)

(By Jamie McGeever; Editing by Diane Craft)

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