Most equity markets closed the week ended January 25, 2013 higher as investor sentiment improved on the back of healthier economic data coming out from Europe and improving fund flows.
The worst performing region was Asia ex Japan which edged up 0.16 per cent as it was dragged down by Korea and Malaysia which lost 2.64 per cent and 2.34 per cent respectively.
Malaysia, where current valuations are ripe, dropped 2.34 per cent on the back of rumours of an early election in the country which raised concern amongst investors who fret over the amount of government links to many of the blue-chips in the country, and the consequences of those links on the companies should the opposition emerge as victors.
BoJ announces aggressive monetary policy
The Bank of Japan (BoJ) announced a new aggressive monetary policy in order to boost the stagnant economy and defeat the deflationary spiral.
Following the two day policy meeting, the BOJ said it agreed to double its inflation target to two per cent which has been strongly proposed by the recently elected Prime Minister Shinzo Abe.
The bank also pledged to implement an open ended asset purchase programme (APP) at a rate of 13 trillion yen per month until a two per cent inflation target is reached.
However, markets were slightly disappointed by the new measures as the bank will embark on said actions only in the year 2014 after completing the current purchasing policy. Many investors had expected the bank to implement these measures immediately.
Greater China: More positive data
In China, the HSBC Flash Manufacturing Purchasing Managers’ Index (PMI) was at 51.9 points for January, where a figure above 50 indicates an expansion.
The preliminary reading exceeded market estimates of 51.7 and the previous 51.5 points recorded in December.
The sustained improvement in the manufacturing sector is in line with the release of a range of other economic figures, suggesting that the Chinese economy is on its way to recovering growth momentum.
Hong Kong’s exports growth accelerated to 14.4 per cent in December, marking the second consecutive month of improvement. The latest figure exceeded market estimates of a 9.2 per cent growth rate and the previous month’s 10.5 per cent reading.
The sustained increase in exports was mainly supported by the revived demand from China and US; exports to these two regions gained 17.4 per cent and 12.8 per cent year on year respectively last month.
Thai exports rose
Thai exports in December 2012 grew by 13.5 per cent y-o-y as compared with a 26.9 per cent y-o-y growth in November 2012. Due to a low-base effect and the economy recovering from last year’s flood, exports grew strongly in 4Q 2012.
According to the Bank of Thailand, the risks to economic growth have declined amid a stable global economic recovery and an improving outlook for exports.
However, the appreciation of the Thai baht could hurt the recovery of Thailand’s export sector, thus, the Thailand government needs to stabilise the Thai baht and prevent it from appreciating strongly.