Asian Market Update – Friday: Modest gains in Asia as US tax reform faces uncertainty

Trump presents tax reform

The Big Question: How is Trump planning to pay for his tax reform?

Asian stock markets saw very modest gains in early morning trading on Friday. News from the US is once again driving the markets, and investors are now wondering what the impact of Trump’s proposed tax reform will be, and whether it will pass Congress.

One analyst was quoted by Reuters as saying that “the size of the tax cut is simply too large to be realistic and repealing deductions will prove politically difficult.”

If the tax reform passes through Congress, it is likely to make US stocks more attractive as compared to emerging markets stocks, as corporate profits will get a boost in the US. The chance of this happening has already added pressure on Asian stock markets, and this trend will likely get stronger as the tax reform gains political support in the US.

In the world of cryptocurrencies, Donald Trump’s administration is also in the news. According to media reports, there is “great enthusiasm within the Trump White House toward blockchain” and “adoption could be seen in the coming years.”

Several US Government agencies, including Centers for Disease Control and General Services Administration are now reportedly experimenting with blockchain technology.

Prices of cryptocurrencies were mostly flat during the early hours of the Asian trading session on Friday.

Before midday in Asia, bitcoin was down 0.5 percent, trading at $4,157. The bitcoin price climbed above the $4,000 mark on Wednesday and has remained in that territory since then.

Etherum was also down by 1.13 percent to $299, dipping just below the $300 level Friday morning.

Litecoin was down 1.37 percent Friday morning, changing hands at around $54.

Main Market Movers – Mid-day Asian Trading Session

Indexes Value at Midday Daily Change
Japan-Nikkei 225 20,301 -0.29%
China-Shanghai Composite Index 3,348 0.27%
Hong Kong –Hang Seng 27,444 0.08%
South Korea-KOSPI 2,385 0. 54%
Australia-ASX 200 5,674 0.07%

Most major Asian stock indexes saw modest gains on Friday morning, as markets regained some losses from earlier in the week.

In Japan, the Nikkei 225 lost a slight 0.29 percent, trading at 20,301 just before midday.

In Greater China, stocks were pointing higher again. The Shanghai Composite Index gained 0.27 percent to 3,348 before midday. In Hong Kong, the Hang Seng Index was mostly flat, trading at 27,444. Mainland Chinese stock markets are closed the whole next week for the National Day holiday.

In South Korea, the KOSPI index gained 0.54 percent to 2,385. The South Korean Stock Exchange will also be closed next week for a public holiday.

Down under, the ASX 200 was nearly flat, trading up by 0.07 percent to 5,674 at midday.

Currencies

On the forex front, the Japanese yen lost 0.24 percent against the US dollar at midday Friday, to 112.55 per dollar.

The Chinese yuan lost 0.33 percent against the US dollar to 6.68 yuan per dollar.

The Australian dollar also lost 0.13 percent on the dollar, changing hands at 1.2749 per US dollar at midday.

Commodities

WTI Oil remained mostly flat Friday, trading at $51.53 per barrel.

Brent Crude was up 0.10 percent to $57.26 per barrel.

Gold lost 0.18 percent to $1,284 an ounce.

Business News across Asia

In South Korea, security analysts believe North Korea is preparing for new provocations in mid-October. The north has a history of launching missiles and performing nuclear tests around important dates, and mid-October coincides with both a major meeting of the Communist Party of China in Beijing and the anniversary of the founding of North Korea.

Take away: North Korea has warned that they are preparing a test of a nuclear weapon in the Pacific Ocean. If that happens in October, it would be the most serious situation on the Korean Peninsula since the war ended more than 50 years ago, and a sharp correction in all markets should be expected.

In Singapore, media is wondering what has happened to Singapore’s global competitiveness. The city state used to lead the WEF Competitiveness ranking for 9 straight years, but has now been surpassed by Switzerland (1st) and the United States (2nd). Singapore is lagging on innovation in this newly released ranking.

Take Away: Singapore can no longer base their success on access to capital and a business-friendly environment. They now need to do more to attract and retain talent in their country. According to the executive chairman of WEF Klaus Schwab, “Talents will become increasingly more important than capital, and therefore the world is moving from the age of capitalism into the age of talentism.”

Featured image from WhiteHouse.gov

Author:
Fredrik Vold is an entrepreneur, financial writer, and technical analysis enthusiast. He has been working and traveling in Asia for several years, and is currently based out of Beijing, China. He closely follows stocks, forex and cryptocurrencies, and is always looking for the next great alternative investment opportunity.