Market Wrap: 9 January 2023

Market Wrap: 9 January 2023

Asia Stocks Gain on China Optimism, Fed Rate Bets:

  • Australia, Hong Kong, Korea equities rise after S&P 500 jumped
  • US services, wages data fuel bets for slower Fed rate hikes


Asian stocks are set to enter a bull market after US equities had their best day in more than a month on Friday, driven by China’s reopening trade and expectations of slower rate hikes.

The MSCI Asia Pacific Index rose 1.6% on Monday as stocks from Sydney to Hong Kong rallied, tracking a more than 2% Friday gain in the S&P 500. The Asia-wide gauge is on track to climb 20% from its October low, with the gains driven by Chinese stocks after the nation pivoted on its Covid policy and offered more policy support for economy and developers. 

The dollar extended Friday’s drop, as traders bet that the Fed will slow rate hikes with the Institute for Supply Management’s index of services in contraction territory and wage growth slowing. The South Korean won, a benchmark emerging market risk currency, strengthened past 1,250 per dollar for the first time in six months.


China’s economic growth will quickly rebound and return to its “normal” path as Beijing provides more financial support to households and companies to help them recover after the nation ended its Covid-Zero policy, Guo Shuqing, party secretary of the People’s Bank of China, said in an interview with People’s Daily published on Sunday.  

Goldman Sachs Group Inc. predicts a further 15% upside for the MSCI China Index. The Hang Seng China Enterprises Index, which tracks Chinese companies, rose as much as 2.5% on Monday. 

“Asian markets have been through a much more severe bear market than it typically tends to see and the China reopening will be more positive even for Asia-ex China markets,” Rupal Agarwal, a quantitative strategist at Sanford C Bernstein in Singapore, said on Bloomberg TV. The 2022 laggards will come back sharply this year, “so we are favoring more China, Korea and Taiwan,” she said.

The US December inflation report due Thursday will be front of mind for traders after last week’s jobs data failed to offer a clear picture, with unemployment at its lowest level in decades, while wage gains were weak. Kansas City Federal Reserve’s Esther George on Friday warned that officials will have a tough road ahead as they attempt to balance inflation and employment while others have previously emphasized rates will be higher, and held there for longer than earlier anticipated.


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