As the final trading day of the quarter approaches, investors in Asian markets are closely watching key economic and political developments.
The markets have been buoyed by a series of stimulus measures from the US Federal Reserve and China, although the outlook remains mixed amid shifting political dynamics in Japan.
On Sunday, the People’s Bank of China announced it would urge banks to reduce mortgage rates for existing home loans by October 31, with expected cuts of around 50 basis points on average. This move follows China’s largest stimulus package since the pandemic, which has spurred a significant rally in the Chinese stock market. The Shanghai Composite saw a remarkable 13% surge last week, marking its best performance since 2008. In Hong Kong, the Hang Seng index also posted its biggest weekly rise since 1998.
In contrast, Japan’s markets face turbulence after the election of former Defense Minister Shigeru Ishiba as the new prime minister. Ishiba, who has been critical of the Bank of Japan’s aggressive monetary easing in the past, suggested that policies should remain accommodative to support Japan’s fragile recovery. The yen surged nearly 2% on Friday, and Japan’s Nikkei 225 tumbled nearly 5% on Monday, led by declines in real estate stocks.
Meanwhile, investors are preparing for a wave of economic data due on Monday, including China’s official and unofficial Purchasing Managers’ Index (PMI) reports, which are expected to show continued contraction in factory activity. Japan’s retail sales and industrial production figures, along with Taiwan’s GDP data, are also on the radar.
As China enters its Golden Week holiday, further market activity is expected to be subdued, but the broader optimism fueled by recent stimulus measures remains evident. Despite lingering economic challenges, such as China’s slumping industrial profits and Japan’s declining industrial production, the region’s equity markets have shown resilience, with Chinese healthcare and tech stocks leading the charge.
