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Asian Markets Mostly Higher After Fed Signals Slowing ‘Soon’

After the U.S. Federal Reserve announced that it expects to switch to smaller rate hikes soon, markets in the Asia-Pacific region traded higher.

November 24, 2022
17 minutes
minute read

After the U.S. Federal Reserve announced that it expects to switch to smaller rate hikes soon, markets in the Asia-Pacific region traded higher. In Malaysia, stocks rose after the state palace announced Anwar Ibrahim as the nation’s prime minister.

The Bank of Korea raised its benchmark interest rates by 25 basis points, bringing the rate to 3.25%. The Kospi rose 0.9% in response, closing at 2,441.33. The Korean won also strengthened slightly against the U.S. dollar, reaching 1,328.2.

The S&P/ASX 200 in Australia rose slightly by 0.14% to close at 7,241.8. The Nikkei 225 in Japan rose by 0.95% to 28,383.09 and the Topix also rose by 1.21% to 2,018.8.

The Shanghai Composite index fell 0.25% to 3,089.31 while the Shenzhen Component index traded 0.147% lower to 10,956.68. Hong Kong’s Hang Seng index rose 0.78% in its final hour of trade.

U.S. stocks closed higher for a second day on Wednesday, as investors hoped that the central bank was making progress in its efforts to tackle high inflation. Markets in the United States will be closed on Thursday for the Thanksgiving holiday, and will close early on Friday.

Malaysian stocks rose after the state palace announced Anwar Ibrahim as the nation's new prime minister. This news was well-received by investors, who see Anwar as a reformer who is committed to improving the country's economy.

The benchmark KLCI index traded higher following previous negative sessions, reaching its highest level in more than two months. This rebound was driven by investor optimism and positive sentiment in the market.

Axiata Group Bhd, a telecommunications group, rose 12.4%, and Maxis Bhd rose 11.2%. Genting Malaysia climbed 7.8% and rubber glove manufacturer Top Glove also gained 7.8% in the afternoon session.

The Malaysian ringgit strengthened slightly against the U.S. dollar and was last quoted at 4.5080.

Billionaire hedge fund manager Bill Ackman has questioned the sustainability of the Hong Kong dollar's peg to the greenback, and his firm Pershing Square has taken a significant short position on the currency.

"We have a large notional short position against the Hong Kong dollar through the ownership of put options," the Pershing Square Holdings CEO said in a series of tweets. He added that they are "confident" that the Hong Kong dollar will continue to weaken against the US dollar.

Ackman wrote that the peg no longer makes sense for Hong Kong and that it is only a matter of time before it breaks.

However, currency strategist Sim Moh Siong from the Bank of Singapore believes that the peg will remain strong despite negative sentiment towards China. This is because recent adjustments, such as the quarantine period for international travelers, have helped to calm the situation down.

"I believe the peg is likely to hold, given that the underlying fundamentals have not changed," he said. "I think the situation with China may have stabilized somewhat, and that could add to the resilience of the Hong Kong dollar peg."

Grab said that it broadly supports Singapore's latest announcement to expand job protection and benefits for gig workers from 2024. This is a positive step forward for the gig economy in Singapore, and we hope that other countries will follow suit.

The new standards for the gig economy will include guaranteeing injury compensation and pension payments. This will primarily affect delivery and ride-hailing companies.

Grab issued a statement to CNBC saying that it is broadly supportive of the proposed measures, but that the implementation needs to be gradual. The company cited current economic conditions, such as recession concerns, as headwinds that need to be considered.

Grab said that they will be guided by considerations to ensure minimum impact on their partners' earnings and consumer prices.

The company called for the same measures to be applied to all gig platforms, citing fairness concerns.

Gojek has stated that the recent measures requiring companies to align their Central Provident Fund pension contribution rates with those of employers will result in reduced take-home earnings for gig workers. The company has already implemented similar policies.

Gojek told CNBC that these recommendations will build on the existing safeguards that they have in place for their driver-partners through their driver benefits program.

The Reserve Bank of New Zealand had considered an even bigger rate hike in making its latest official cash rate decision. Despite its move to raise rates by 75 basis points already being its steepest ever, the Bank decided to leave rates unchanged.

RBNZ Governor Adrian Orr said on CNBC's "Squawk Box Asia" that the central bank had more discussion around a 75 versus 100 than a 50 versus 75."Now we can say that we are unambiguously contractionary in our monetary position," Orr said. "We need to be, given the current state of the economy."

Foxconn, a major supplier of Apple products, has stated that new recruits to its iPhone factory in Zhengzhou have been appealing in regards to compensation. This information was found on the company's website.

After media reports of a mass protest by hundreds of workers, videos began circulating on social media showing people smashing surveillance cameras and windows. The statement appears to be in response to this incident.

Foxconn has stated that it has always fulfilled its contractual obligations with regards to employee allowances, and that it will continue to communicate with relevant colleagues on this matter. The company has also denied reports that Covid-positive employees are residing in its factory dormitories, calling these claims "patently untrue."

The company will continue to communicate with employees and the government to prevent any further violence from occurring.

Shares of Hon Hai Technology Group, which is better known as Foxconn, traded 0.5% lower in early Thursday trading on the Taiwan Stock Exchange.

The Bank of Korea raised its benchmark interest rate by 25 basis points to 3.25%. This is a smaller hike than its previous move, and it is widely in line with expectations.

A recent poll of economists by Reuters showed that most expected the central bank to lower rates amid signs of slowing domestic growth.

The inflation rate in October was 5.7%, according to the latest figures released earlier this month. This is much higher than the central bank's target of 2%.

Governor Rhee Chang-yong of the Bank of Korea is scheduled to hold a press conference later today to announce the monetary policy decision.

Rob Luna, chief investment strategist at asset manager Surevest, believes that investors should buy into one large-cap stock right now. Luna cites the stock's strong fundamentals and attractive valuation as reasons to believe that it will continue to perform well in the future. He calls its CEO a "visionary leader."

Luna advised investors to reallocate into smaller companies, naming two stocks that he called "best in breed."

Stocks rose Wednesday, building on the previous day's gains, as investors welcomed minutes from the Federal Reserve that signaled a slower pace of interest rate hikes ahead.

The Dow Jones Industrial Average rose 95.96 points, or 0.28%, to 34,194.06 on Wednesday. The S&P 500 gained 0.59% to close at 4,027.26 and the Nasdaq Composite increased 0.99% to 11,285.32.

Nordstrom's shares fell 4.24% after the company reaffirmed its forecast. However, Nordstrom's latest results beat profit and sales expectations, according to consensus expectations on Refinitiv. Tesla rose 7.82% after Citi upgraded its shares to neutral from sell. Deere surged 5.03% on an earnings beat.

If a short-seller's prediction comes true, investors in a British supermarket company will face more pain.

The hedge fund is currently betting that shares in the grocer will fall by 44%. If their prediction comes true, they stand to make a profit of £32.6 million.

The fund's chief investment officer also believes that the supermarket will raise fresh capital by diluting shareholders year after year to keep itself afloat in a challenging environment.

After the release of minutes from the Federal Reserve's November meeting, stocks rose on Wednesday afternoon. The report showed that the central bank sees progress in its fight to lower inflation and expects to slow the pace of interest rate hikes going forward. This news was welcomed by investors, leading to a rise in stock prices.

The minutes from the meeting stated that a substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate. The uncertain lags and magnitudes associated with the effects of monetary policy actions on economic activity and inflation were among the reasons cited for why such an assessment was important.

This suggests that the Federal Reserve is likely to deliver a smaller rate hike in December and in the early months of 2023.

The news was welcomed by markets, with the Dow Jones Industrial Average rising 130 points, or 0.38%. The S&P 500 gained 0.70% and the Nasdaq Composite increased 1.10%.

Adan Harris
Managing Editor
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

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