Asian stock indexes changed course to trade largely positive on Tuesday morning. Markets remained uncertain over trade concerns and emerging market worries.
Japan’s Nikkei 225 was up in the morning after trading down earlier, rising 0.11 percent with majority of the major sectors in the positive. South Korea’s Kospi also reversed course to trade up by 0.12 percent.
In the Greater China region, Hong Kong’s Hang Seng index was up by 0.14 percent in early hours trade. Over on the mainland, the Shanghai composite posted gains of 0.24 percent while the Shenzhen composite rose 0.358 percent.
Down Under, Australia’s ASX 200 bucked the trend by continuing to trade in negative territory, down by 0.26 percent. The heavily weighted financial sector shed 0.67 percent.
The Reserve Bank of Australia (RBA) is due to announce its decision on interest rates later today, though some market observers voice skepticism over the likelihood of any change in policy.
“It would be easier to find a golden ticket to Willy (Wonka’s) Chocolate factory than an economist who thinks that we’ll see a change of rate from them today, so once again the focus will be on the rate statement,” Rakuten Securities said in a morning note.
One of the major economic focal points of the week is Canada’s expected resumption of negotiations with the U.S. on the future of NAFTA after the two nations failed to come to an agreement last week. U.S. markets were closed on Monday for Labor Day.
As for Asia’s largest economy, a survey released yesterday appeared to show that China is beginning to suffer some ill effects from its trade war against Washington: The Caixin/Markit Purchasing Manager’s Index (PMI) came in at 50.6, its lowest level since June 2017, as export sales fell for the fifth consecutive month.
Another concern for Asia will be the state of emerging market (EM) currencies as the space continues to suffer weakness. On Monday, Indonesia’s rupiah fell to its weakest level in more than 20 years and the country’s central bank reportedly said it would intervene in foreign exchange and bond markets.
“I think it’s difficult for them,” said Richard Jerram, chief economist at Bank of Singapore, on CNBC’s “The Rundown.”
With the latest inflation data in Indonesia at 3 percent, Jerram said: “There’s no need, for domestic reasons, to be raising interest rates.” Nevertheless, he added, the move to stabilize the rupiah through the use of interest rates has been “quite effective” relative to the “disasters” seen in other emerging markets such as Turkey and Argentina.
On Indonesia, DBS analysts said in a note that “respite for EM rates is likely to be elusive in the near term.”
“Between EM contagion, Fed hikes and trade war, it might prove difficult for investors to take on local debt risks at this point,” they cautioned.
The U.S. dollar index, which tracks the greenback against a basket of currencies, gained about 0.1 percent at 95.239 as of 9:40 a.m. HK/SIN after trading around 95.14 yesterday.
The Japanese yen trade lost its earlier gains to trade largely flat against the dollar at 111.09 yen while the Australian dollar weakened to around $0.72 as of 9:41 a.m. HK/SIN.
In the oil markets, the global benchmark Brent crude futures were largely flat at $78.11 a barrel while U.S. crude futures were up by 0.4 percent at $70.08 a barrel.
