APAC Financial Markets Spotlight – August 2024

Growth and inflation outlook differentials among APAC countries lead to divergence in monetary policies within the region even as ECB has cut rates and the Fed left the door open for a rate cut. The PBoC lowered interest rates further. The BoJ hiked policy rates again, and narrower US-Japan rate differentials bode well for JPY versus USD. Equities, fixed income and FX broadly advanced in APAC over 3M, ending July 31, 2024.

Key highlights:

• APAC - Equities advanced in the last 3M. Tech supply chain and data center equities rose further amid AI upcycle. Bond yields tracked US Treasury yields lower, except in Japan. China property bond rally has sustained longer than equities. Monetary policies diverged in the region, due to divergence in inflation and growth paths.
• Japan – The BoJ tightened further in July, raising its policy rate to 0.25%. It also planned to reduce monthly JGB purchases in a predictable manner, while allowing enough flexibility in the JGB market. JGB yields rose YTD, and curves steepened on higher inflation expectations. Bank stocks especially benefited from higher yields.
• Australia – Australian housing prices remained sticky, but non-housing inflation slowed in June. Markets expected no further tightening by the RBA and priced in a cut in 1Q25.
• China – The PBoC cut key interest rates to support growth. CGB yields fell to new lows, led by shorts, despite a larger bond supply and the PBoC’s intervention. Equities pulled back after a stimulus-boosted rally, as growth challenge and deflation risk persist.
• India – Indian equity and fixed income outperformed peers YTD, helped by a strong growth outlook, bond index inclusion, and a resilient FX. Indian 10s/2s yield curve stayed almost flat, as the Treasury curve dis-inverted. RBI continued to keep USD/INR stable.
• Foreign Exchange – A weaker USD sent most APAC currencies stronger. USD/JPY broke above 160 in June, given uncertainty around BoJ policies and continuous market interests in short JPY carry trades. But it fell back below 150 after the BoJ intervened to support the yen and hiked its policy rates. AUD/USD rose throughout mid-July as RBA’s tone turned more hawkish amid rising inflation risks, but retraced afterwards as Q2 core inflation came in below expectation. TWD depreciated amid foreign equity outflows.

This report, published quarterly, delves into the major macroeconomic, fixed income, equity and FX market events shaping the APAC financial markets, leveraging our exclusive databases and platforms such as FTSE Russell indices across asset classes, LSEG Workspace, Lipper fund flows and many more.

From key market movements to emerging trends, this report provides insights on how those critical drivers impact different asset classes across individual APAC markets. This report also discusses the interplay between the APAC markets and global events, helping navigate the complexities of today’s financial world.

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