Another subdued trading day in Asia sees regional indices slide slightly into the red on geopolitical concerns.
Geopolitical is certainly the new buzzword flying around the markets at the moment, as the fall-out from last week’s Syria tough love shown by the U.S. continues to reverberate. It is really what they didn’t say that continues to weigh on Asian bourses. With the U.S. Navy parked up of the Korean peninsula, and China apparently mobilising 150,000 troops towards the North Korea border to manage potential refugee flows, the Korean Won and the region’s major indices slipped into the red and stayed there.
However, throw into the mix the French elections becoming a four-way race after the latest polls, and the danger of more conflagrations in the Middle-East interrupting supplies to energy-hungry Asia, then I guess it’s no surprise the path of least resistance was down. With so many moving parts in the world stage, we can expect to hear geopolitics and risk aversion for the near future. Did I mention the G-7 is meeting today to discuss more sanctions on Russia?
Taking a look at the region’s main boards, the one ray of light was the Australian ASX 200. The surge in oil and in mining stocks helping it to a small (0.3%) up day. The lucky country has been buoyed by the rally in commodities in recent times and is closing just shy of its two-year high at 5950 set a few days ago.
The Nikkei spent most of the day under pressure. A resurgent Yen on those safe-haven flows I mentioned and the impending release of Toshiba’s 3rd quarter results this afternoon (finally) weighed on the Nikkei. the Nikkei closes just above the four-month low at 18590, down 0.6% on the day.
The Hang Seng also suffered. Firstly on the China troop movements mentioned above, and also as the PBOC continues to keep liquidity tight in the offshore CNH. This flowed through to the HKD forward market pushing funding rates up. The Hang Seng fell 0.9% on the day but in the bigger picture remains in an uptrend. Closing at 14060 and not too far away from the 18-month high of a few weeks ago at 24060.
The China A50 composite index also fell as Mr.Trump’s none too subtle shot across the bows of President Xi continues to reverberate regarding trade issues. The PBOC’s tighter onshore funding isn’t helping either. The A50 continues to make heavy work of any move up to the 10550 regions with support below at 10305, the 100-day moving average. Political worries will continue with the index flat on the day after initially falling.