April 25 (Reuters) – A look at the day ahead in Asian markets by Jamie McGeever.
As global markets stand still ahead of this week’s US mega-tech results and Bank of Japan meeting, investors will be keeping one eye on the first estimate of South Korea’s first-quarter GDP growth and another on Tuesday Recent turns in major Asian countries straighten currencies.
The falling value of the yuan, particularly against the euro, continues to cast doubt on China’s post-Covid recovery, while Hong Kong’s central bank grapples with mounting pressures on its financial system and exchange rate.
In a Reuters poll of economists, the consensus is that South Korea’s economy grew 0.2% in the first quarter after contracting 0.4% in the last quarter of last year, narrowly escaping the recession and facing the challenge for policymakers to underpin growth.
On an annualized basis, GDP likely grew 0.9% in the first quarter, the survey showed, up from 1.3% in the fourth quarter of last year.
One of the biggest brakes on growth could be trade. Exports to China, the country’s largest trading partner, fell 33.4%.
At first glance, however, China’s economic recovery since reopening after the pandemic looks strong. Economic surprises are the most positive in 17 years, and a slew of investment banks are optimistic about China’s growth and assets.
But China’s geopolitical risk — Taiwan, US ties, cyber warfare, spy balloons, Beijing’s close ties with Moscow — is great and growing.
China may have said on Monday it respects the status of former Soviet member states as sovereign nations, but uneasiness across Europe sparked by contrary comments from China’s envoys in Paris will not dissipate quickly.
China’s yuan fell to a 19-month low of 7.60 against the euro on Monday. It has fallen against the euro for five consecutive weeks, its longest losing streak since 2018, and as the euro tumbles globally, politics may be playing a more prominent role in investors’ minds.
The Hong Kong Monetary Authority, meanwhile, is withdrawing money market liquidity to intervene in the foreign exchange market and prop up its currency.
The HKMA invaded the forex market last Wednesday, buying $6.9 billion HK$ ($881M) to prevent the HK$ from breaking the weak end of its trading range at 7.85 per US$.
However, as a result, the HKMA’s total balance has fallen below HK$50 billion, the lowest level since 2008. Banks’ total cash holdings at the HKMA, a key metric of cash in the banking system, was last more than HK$300 billion as of June and more than HK$450 billion less than two years ago.
Tuesday will be a quiet day for markets in Australia and New Zealand – they are closed for the Anzac Day holiday.
Here are three key developments that could give markets more direction on Tuesday:
– GDP of South Korea (Q1)
– Japan Services PPI (March)
– Trade with Hong Kong (March)
By Jamie McGeever; Editing by Josie Kao
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Jamie McGeever
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