Aug 15 (Reuters) – Financial markets columnist Jamie McGeever looks ahead to the future of Asian markets.
After a wave of volatility in emerging markets, particularly Argentina and Russia, on Monday, the focus again returned to China, the source of much of the deep unease and uncertainty over emerging markets.
July’s investment, retail sales, unemployment and industrial production figures are due to be released against a worrying backdrop of deflation. slower growthincreased contagion risk due to market downturn and collapse of real estate sector.
As if that wasn’t enough for Asian markets on Tuesday, minutes from the Reserve Bank of Australia’s last policy meeting, Australian wage growth data and Japan’s second quarter GDP growth are also due to be released.
The foreign exchange market has also been monitored by the intervention of the Japanese authorities, and the yen has fallen to the 145 yen level against the dollar, and is hovering near the lowest level since 2008 against the euro.
If recent Chinese economic data is any guide, Tuesday’s latest economic data are likely to disappoint. Economists polled by Reuters expect annual growth in investment and industrial production to remain firm from June levels, while retail sales growth is expected to rise to 4.5% from 3.1%.
Officials have so far resisted growing calls for massive fiscal and monetary stimulus. One reason is currency. The currency has already depreciated so much that investors are shying away from Chinese assets. The Chinese government would not want to add fuel to either fire.
The offshore yuan fell to its lowest level of the year on Monday, approaching 7.30 yuan to the dollar, pushing the yuan’s official onshore exchange rate to a one-month low.
Tuesday’s data dump came a day before the central bank released its latest monthly monetary policy decision. Economists surveyed by Reuters said the medium-term policy lending rate will remain unchanged, but that could change if another noticeably weaker economic data is released.
Some investors are reducing their exposure to China. Some large U.S.-based hedge funds cut their stakes in Chinese companies in the second quarter, according to regulatory filings.
China’s blue chip CSI 300 index fell 0.7% on Monday, following a 2.3% drop on Friday (its biggest drop since October), contributing to declines across the continent and across the emerging market complex.
The MSCI Emerging Markets Index and Asia Ex-Japan Index both fell 1.3% on Monday, following a 1% drop on Friday. With US dollar and Treasury yields rising, global financial conditions are tightening, and there seems to be no immediate respite for emerging markets.
Here are the key developments that could give the market more direction on Tuesday:
– China Retail Sales, Unemployment, Investment, Industrial Production (July)
– RBA minutes
– Japan’s Q2 GDP
By Jamie McGever.Editing: Margherita Choi
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