Economy

This is the yuan from Stocksak


© Stocksak. FILEPHOTO: This illustration photo shows a China Yuan note on May 31, 2017. REUTERS/Thomas White/Illustration/File Photo

By Jamie McGeever

(Stocksak), – A look into the day ahead on Asian markets from Jamie McGeever

However fleeting the investor rapprochement may be, it does not mean that they are giving the Chinese markets a colder arm.

China’s exposure has been a topic of concern for some time. This is evident in the steady decline of the onshore and offshore exchange rates, tech stocks, the equity complex and other indicators.

The two trading sessions that President Xi Jinping held to tighten his grip on the country last weekend by securing a historic three-term as leader suggest that there has been a growing sense of wariness.

China’s main equity indices failed Tuesday to recover Monday’s heavy losses. Hong Kong’s indexes, however, reached a new 13-year low. And this was despite the fact that Hong Kong’s main equity indexes had just suffered their worst day since the global economic crisis.

Although tech stocks in Hong Kong may have rebounded 3%, they’ve lost 45% in just four short months.

Then there is the yuan. It is falling fast as capital flows accelerate. The yuan is currently at its weakest since 2009, and its lowest since its 2010 launch.

Is the central bank losing the ability to control the exchange rates? Some observers claim that the People’s Bank of China no longer controls the market but is instead following it. (Graphic: Chinese yuan – onshore, offshore spread https://fingfx.thomsonreuters.com/gfx/mkt/myvmomkgnvr/YUANRATES.png (Graphic: Chinese yuan – spot vs PBOC rate https://fingfx.thomsonreuters.com/gfx/mkt/gdvzqrdwkpw/YUAN2.jpg)

Despite all this, it is possible that buoyant sentiment in the U.S. markets will spread to Asia and China on Wednesday. Treasuries saw a ‘turnaround Tuesday’, especially at the end, while Wall Street saw another solid rally.

Refinitiv data has shown that nearly three quarters (or more) of the 129 companies reporting so far have reported Q3 earnings. After Tuesday’s bell, the big hitters are Microsoft (NASDAQ) and Alphabet(NASDAQ:).

Key developments that could provide further direction for markets on Wednesday:

Inflation in Australia (Q3)

Japan services PPI (September).

Japan leading indicator (August, revised)

Canada interest rate decision (75 bps hike forecast)

Earnings from the U.S.

News Source and Credit

Stocksak Editorial

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