Asian markets mixed as Wall Street snaps four-day losing streak on bank woes

The Reserve Bank of Australia’s latest monetary policy statement indicates the central bank has already reached its peak cash rate of 3.85%, the Commonwealth Bank of Australia said in a Friday note.

“Our view on this important guidance is that the Board is willing to raise the cash rate again in this cycle. But another rate hike will require the economic data, particularly around inflation, GDP, unemployment and wages, to come in stronger than their updated forecasts ,” CBA economists wrote.

“Put another way, we do not think the RBA will raise the cash rate again if the economic data prints in line or weaker than their forecasts,”[ads1]; they wrote.

– Jihye Lee

HSBC shareholders will vote on proposals at the bank’s annual meeting on Friday, including whether to spin off the Asia business.

Resolutions 17 and 18 on the agenda, presented by a group of investors led by Ken Lui, call for a “strategic review” of the company, including the spinoff proposal and fixed dividend.

These have been backed by HSBC’s top shareholder Ping An Insurance, but HSBC advised investors to reject the two resolutions, a stance supported by investor advisory firms ISS and Glass Lewis.

Since these are considered “special resolutions”, Luis’ proposal will need 75% of the votes cast to pass.

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— Lim Hui Jie

Headline inflation in the Philippines eased for the third month in a row to 6.6% year-on-year, down from 7.6% in March.

This was also lower than the economists’ expectations of an increase of 7 per cent.

In a release, the country’s statistics authority said the downward trend was mainly caused by a lower inflation rate for food and non-alcoholic beverages, which registered 7.9% compared to 9.3% in March.

Transport was the second largest contributor to the downward trend, with an inflation rate of 2.6% in April compared to 5.3% in March.

Inflation in the Philippines hit a 15-year high in January at 8.7%, the highest level since October 2008.

— Lim Hui Jie

Australia’s central bank still sees that “some further tightening of monetary policy” may be needed to curb inflation, the Reserve Bank of Australia said in its May monetary policy statement.

The central bank noted that this “will depend on how the economy and inflation develop.”

This comes as the Reserve Bank of Australia surprised markets by raising interest rates by 25 basis points to 3.85% on Tuesday.

In its statement, the RBA lowered its near-term inflation and GDP forecasts, while saying inflation is still not expected to return to the upper end of the 2-3% target range until mid-2025.

The central bank also envisages that commodity inflation will slow further, while energy and service growth looks set to remain high, and the service sector will see growth in labor costs and rents.

— Lim Hui Jie

Indonesia’s gross domestic product increased by 5.03% year-on-year in the first quarter of 2023.

The robust economic growth beat expectations of 4.95% predicted in a Reuters poll and higher than the 5.01% growth recorded in the first quarter of last year.

On a quarterly basis, Indonesia’s economy shrank by 0.92%, less than forecasts for a 1% decline. The economy grew by 0.36% in the last quarter of last year.

Based on output, the transport and storage sector had the largest growth at 15.93%, the country’s statistics department said. Based on expenditure, exports of goods and services recorded the highest growth at 11.68%.

— Lim Hui Jie

China’s Caixin/S&P Global Services Purchasing Managers Index fell to 56.4 in April from 57.8 the previous month.

The reading marked the second highest number recorded since November 2020 and the fourth consecutive month above the 50 mark that separates growth and contraction.

The survey showed a rise in services activity despite disappointing factory activity in mainland China earlier this week.

The reading suggests that service activity is still “undergoing a rapid recovery,” according to Wang Zhe, senior economist at Caixin Insight Group.

– Jihye Lee

Hong Kong’s biggest IPO so far in 2023 flopped last week, suggesting the market still needs time to recover, despite hopes of recovery.

Shares of Chinese liquor maker ZJLD Group fell nearly 18% on their first day of trading on April 27.

“Sentiment in the IPO markets has not built up yet. Many industries are still suffering,” said Ringo Choi, Asia-Pacific IPO head at EY.

“The underlying economy is not doing well,” said Irene Chu, partner at KPMG China. “The concern remains about the high-interest rate environment, and much of the attention in the Greater China region is about the recovery of the economy,” Chu said.

The share price of ZJLD Group has been relatively flat since last week.

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– Sheila Chiang

A range of economic data is expected next week for Asia-Pacific markets, including China’s inflation data, India’s industrial production and the Philippines’ trade balance.

On Monday, Taiwan reports its trade data. Economists at Citi expect Taiwan’s April exports to fall 21.4% year-on-year and imports to fall 22.6% year-on-year.

“Non-tech exports to China have not yet recovered (as indicated by trade data from China) and lower commodity prices will reduce the value of exports,” Citi economists wrote in a note on Thursday.

China’s April trade data will also be released on Tuesday along with Malaysia’s gross domestic product.

South Korea’s current account balance for March and unemployment for April are expected on Wednesday.

China’s producer price index and consumer price index are scheduled to be published on Thursday. For March, China’s CPI reading rose marginally by 0.7% year-on-year, while PPI marked a 2.5% year-on-year decline. The Philippines reports first-quarter gross domestic product this day as well.

India’s industrial production for March will be published on Friday after marking a year-on-year growth of 5.6% in February. Citi economists expect headline inflation to fall to 4.8% year-on-year, marking the first print below 5% since November 2021.

– Jihye Lee

Goldman Sachs has identified a number of energy stocks to own ahead of an expected turnaround in market sentiment towards the oil and gas sector.

The Wall Street bank said it had observed greater ownership of the energy sector due to a change in the way ESG investors – or those that consider environmental, social and governance factors – approach investments. Instead of renouncing fossil fuels altogether, they are focusing more on engaging with these companies for better environmental results, according to the bank.

ESG funds increased their exposure to the energy sector by 8 percentage points in the first three months of the year, Goldman added.

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– Ganesh Rao

If markets avoid a recession, Goldman Sachs says interest rates are likely to rise, putting downward pressure on valuations. In this case, the bank asks investors to position themselves to position themselves in markets outside the United States

“We continue to recommend an overweight in non-US markets that are cheap with a similar growth profile. Returns for dollar-based investors should also get a boost from a gradually weaker dollar,” several analysts wrote in a Thursday note.

The company added that it favors quality growth and stable margins “along with some value – energy, natural resources and European banks.” Our US and Asia strategists also have a preference for quality and defensive stocks.

– Hakyung Kim

Trading for Western Alliance Bancorp shares was halted several times Thursday, as the stock plunged 58.2%. The move comes as regional bank PacWest Bancorp saw its stock drop 59% on news it was exploring a sale. The SPDR S&P Regional Banking ETF lost more than 9% Thursday amid the uncertainty.

A round of economic data points Thursday morning mostly came in worse than Wall Street’s expectations.

Jobless claims totaled 242,000 for the week ended April 29, higher than the Dow Jones estimate of 236,000. First-quarter labor productivity fell 2.7% against estimates for a 1.9% drop, while unit labor costs, a gauge of inflation, accelerated 6.3% in Q1, beating expectations of 5.5%.

In the end, the trade deficit fell to $64.2 billion, but that was higher than the estimate of $63.1 billion.

-Jeff Cox

The European Central Bank on Thursday raised interest rates by a quarter of a percentage point, in line with market expectations, and noted that inflation is still too high and underlying pressures persist.

A day after the US central bank announced a similar hike, the ECB raised its key lending rates to 3.75%, 4% and 3.25%, respectively, near 15-year highs. The Fed’s move brought the funds rate to a target range of 5%-5.25%.

Overall inflation is around 7% in the eurozone, well above the ECB’s 2% target.

-Jeff Cox