Geopolitics still dominate news flow
Asian equities were slightly down over the past two weeks as rising geopolitical tensions on the Korean Peninsula spooked global investors, which followed geopolitical uncertainty in Syria and the Middle East in previous weeks.
On the global political landscape, the upcoming French elections are catching headlines. However, we believe the impact on Asian equities will be quite minimal compared to major events last year such as Brexit and the US Presidential elections.
Regional indicators rise while eyes fix on US bond markets
Corporate earnings across the region continue to be revised upwards, led by Korea and cyclical sectors such as materials and energy. As we approach the peak of the Q1 earnings release, corporate guidance has been turning more positive.
We believe the recent movement in US bond yields needs to be watched very closely. Growth momentum in the US is slowing and inflation momentum is not as strong as the market was expecting. By contrast, there is a fairly healthy economic recovery going on in Asia, particularly in China.
China’s macroeconomic numbers such as Q1 GDP and March growth activity surprised on the upside while retail sales posted a particularly large jump, bouncing back from weak readings in January and February.
Tighter property tax rules hit Hong Kong
In Hong Kong, the government announced it would tighten property rules for the second time since November last year. First-time homebuyers acquiring more than one property in a single contract are required to pay 15% in taxes, closing a previous loophole for buyers of multiple properties who enjoyed lower tax rates.
Macau VIP gaming enjoys a winning streak
The recovery in the Macau gaming sector continues as Q1 saw 13% year-on-year (YOY) growth in gross gaming revenues (GGR). The VIP segment is still outgrowing the mass: growth rates were 17% and 8% respectively. For the gaming sector as a whole, Q2 continues to represent a low base therefore growth numbers should be solid for a few more months. Comparative YOY figures moving into H2 are expected to be tougher.
Trump and Xi’s 100-day plan to unfold
Following talks between Presidents Trump and Xi in Florida, the agreement of a new 100-day plan for trade talks, with the intention of reducing the trade deficit and boosting US exports, is deserving of close attention and we will be monitoring the potential impact of these talks as more details emerge.
We think the likely outcome will be one of compromise whereby broad tariffs on China’s exports will be avoided but compromises will be struck on selective areas and China may commit to importing more American goods and services over time.
In onze ogen kunnen de Aziatische aandelenmarkten op langere termijn sterke rendementen opleveren.
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