Hong Kong: Asian stocks may scale new peaks this week if the US central bank lowers interest rates and acts to soothe investor worries that a credit squeeze and housing slump could push the world’s largest economy into recession.
Earnings watch: Nippon Steel’s Yawata plant in Japan. The world’s No.2 steel maker will report its results this week.
But the odds are growing for another pullback in regional markets with the US economy struggling, the dollar weakening and oil prices hitting fresh record highs.
Still, market watchers say the prospect of relatively stronger Asian growth and appreciating Asian currencies are reasons why investors have been flocking to invest in the region.
“Investors are extremely enthusiastic in taking advantage of the perception that this region is in better shape. Domestic conditions are positive,” said Hong Kong-based Mark Konyn, chief executive, Asia Pacific, of Allianz RCM asset management unit.
“We saw growth numbers out of China that even with a margin of error, are pretty strong. Hong Kong’s economy is doing well, so is Singapore. So the region overall is in pretty good shape.”
MSCI’s measure of Asia Pacific stocks excluding Japan hit a record high on 26 October and is up more than 70% this year. MSCI’s main world equity index has gained a more modest 14% and has still some way to go before returning to its 11 October peak.
Earnings will remain a big focus this week, with Nippon Steel Corp., the world’s No.2 steel maker, South Korea’s top lender Kookmin Bank and China’s top offshore oil and gas producer CNOOC Ltd. among firms set to report.
The US Federal Reserve’s Open Market Committee holds a two-day meeting on Tuesday and Wednesday.