- China’s economic targets for 2017 announced
- Huge victory for Modi in India bodes well for reform
- South Korean president removed from office
Asian equities fell back modestly in the past two weeks on mild profit taking. The US dollar strengthened on the back of raised expectations for a rate hike from the Federal Reserve.
NPC calls for tighter risk controls
Chinese companies benefiting from reform continued to perform well, sustaining one of the main themes from 2016. While the annual meeting of the National People’s Congress (NPC) in Beijing is only due to finish on Wednesday, many of China’s key economic targets for 2017 were announced as the event progressed, along with a number of policy announcements. In brief, the NPC sent a strong message to shift focus from boosting economic growth to reining in financial risks, with the help of structural reforms rather than blunt policy tightening.
We believe this is a further step in policymakers recovering credibility in China and should help support current positive market sentiment.
The GDP growth target for 2017 has been set at “about 6.5%”, although Premier Li Keqiang indicated this is viewed as a floor and GDP could climb higher. Containing financial risks and corporate deleveraging were identified as policy priorities with financial regulators vowing for better coordination against shadow finance and capital market speculation. After surprising the market with larger-than-expected cuts in steel and coal excess capacity, and given the surge in commodity prices, the government adjusted down the capacity reduction targets for the two industries. However, it pledged to expand reform into coal-fired power generation and other overcapacity industries.
The overall tone on policy settings was confidence to manage social pressure and accept lower economic growth, which we view as very encouraging. The PBoC also guided for “more neutral” monetary policy, with slower and still solid mortgage loan growth. Overall, the policy tone displayed a marginal tightening bias.
BJP landslide in Uttar Pradesh
Results for the Indian provincial elections held in five states over the past month were announced. The ruling BJP swept the polls in India’s largest and politically most important state, Uttar Pradesh. Given that Uttar Pradesh contributes about 15% of the total seats in the national Parliament, the BJP’s landslide victory in the state augurs well for the party’s prospects in the next national elections scheduled for the first half 2019 and for sentiment on policy continuity.
The results should embolden the ruling party to pursue its current agenda with more vigour and fragment the opposition in the near term, particularly the regional parties.
We expect to see a continuation of the reform path especially in implementation of the Goods and Services Tax (GST) scheduled for July.
President Park impeached
In South Korea, the Constitutional Court upheld the National Assembly’s impeachment motion against President Park Geun-hye, resulting in her immediate removal from office. The court’s eight justices voted unanimously to uphold the impeachment motion, clearing the way for an election to replace Park to occur within 60 days. Prime Minister and acting President Hwang Kyo-ahn will continue to lead the government until a new president is in place with the most likely date for the next election is 9 May.
At this stage, the left-leaning DPK party is well ahead in opinion polls. A DPK government is likely push to spend more on social safety net programmes to redistribute wealth and “democratise” the economy, as well as accelerate efforts to implement reforms designed to curtail the political and economic power of the Korea’s large, family-controlled business.
While government transition is important, what is more important for Korean earnings and stock market prospects is the continuing recovery in global trade growth as well as the Chinese economy.
In onze ogen kunnen de Aziatische aandelenmarkten op langere termijn sterke rendementen opleveren.
Donald Trump zal vanaf januari een van de machtigste mannen van de wereld worden. Hij heeft tijdens zijn kandidatuur voor het president...
Azië biedt voor de selectieve belegger veel interessante kansen. Lees meer daarover in het artikel dat eerder in deze serie verscheen. ...
De regio Azië biedt een hogere economische groei dan in de rest van de wereld. Daarnaast voeren een aantal landen hervormingen door die...