The Big Question: Will markets shrug off the latest North Korea episode as fast as they used to?
Major equity markets in the Asia Pacific rattled on Monday, as North Korea tested the most powerful nuclear weapon to date, said to be a hydrogen bomb. Regional tensions are again at an elevated level.
In South Korea, the KOSPI index dipped 0.72 percent to 2,340.83 around midday.
In Japan, the Nikkei 225 went into a downside move immediately after market open, losing more than 130 points, trading at 19,479.40 at one point. At midday, the benchmark was down 0.90 percent to 19,514.30.
Down under, the ASX 200 went into a steep fall in early morning trade, though it later regained some ground. The index was still down 0.46 percent to 5,698.30 at midday.
In Greater China, stocks were also pointing lower. The Hang Seng was down 0.53 percent 27,804.82. The Shanghai Composite Index surged in early morning trading, but lost some ground later. At midday, the benchmark index was down a slight 0.03 percent to 3,368.26.
North Korea said on Sunday that it had successfully tested a hydrogen bomb and was able to place the nuclear warhead onto a ballistic missile. Though it’s unclear if it was as successful as the country claims, analysts say this is certainly the most powerful test North Korea has conducted so far.
The test elevated regional tensions and spooked investors to perceived safe haven assets such as gold, the Japanese yen and sovereign bonds.
US President Trump said it was “hostile and dangerous” and threatened “massive” military response and suspension of trade with countries that do business with North Korea.
Russia’s Vladimir Putin and China’s Xi Jinping, after meeting on the sidelines of the BRICS Summit in Eastern China, urged “proper handling” of the latest nuclear test by North Korea, though it is unclear exactly what that means.
Asian investors have tended to shrug off North Korea factors quickly in the past, and there is no indication that they won’t do the same this time around. However, uncertainty still remains as to how the major powers will handle the situation.
Market-sensitive news this week to watch: 1. The meeting of the ECB is looming, as some within the ECB are unhappy with the current strengthening of the euro; 2. second round of NAFTA talks to be continued in Mexico City among the US, Canada and Mexico.
Main Market Movers – Mid-day Asian Trading Session
|Indexes||Value at Midday||Daily Change|
|Japan-Nikkei Stock Average 225||19,514.30||-0.90%|
|China-Shanghai Composite Index||3,368.26||-0.03%|
|Hong Kong-Hang Seng||27,804.82||-0.53%|
|South Korea- KOSPI||2,340.83||-0.72%|
In the world of digital currency, bitcoin and ethereum prices were on a downward movement overnight during the Asian trading session, after both surged to record highs earlier.
The bitcoin price continued on a downward path that started Saturday, when the price surpassed the $4,960 mark. Bitcoin was changing hands at around $4,520, down 1.88 percent at midday.
A similar trend is seen in ethereum’s price. The digital currency has been pointing lower since Friday, when prices surged to as high as near the $400 mark. The ethereum price has since moved down. Overnight, it lost 2.27 percent to $342.66.
The Japanese yen gained 0.4 percent against the US dollar on Monday morning to 109.79 per dollar. As the Korean Peninsula tension rose again, investors in Japan, which is the largest creditor, are perceived to retreat funds back to the country, thus pushing up the yen.
The yuan continue on a weeks-long rally against the greenback on Monday, having strengthened 0.1 percent to 6.5485 per dollar.
The Australian dollar lost 0.26 percent to 1.2559 per dollar in early Monday morning trading.
WTI Oil was up 0.15 percent to $47.38 per barrel.
Brent Crude lost 0.53 percent to $52.46 per barrel.
Gold was up 0.53 percent to $1,333.07 an ounce.
Business News across Asia
In China, the 2017 BRICS Summit officially kicked off in Xiamen, East China’s Fujian Province on Sunday. As the host nation of the annual summit of the five emerging economies – Brazil, Russia, India, China and South Africa, China is calling for stronger partnership. In a speech on Sunday, Chinese President Xi Jinping called for even deeper ties among the countries against a world of uncertainty and rising protectionism.
Take away: Concrete actions arising from the summit is unlikely, but there is talk of the countries forming a rating agency on their own to challenge the current monopoly by the Big Three, which they countries say are unfair to developing countries. The Big Three today are Standard & Poor’s, Moody’s, and Fitch.
In South Korea: Kim Jong-un of North Korea once again dominated the headlines in the country that felt directly threatened by the latest nuclear test in the North. Most headlines focused on how to respond to the nuclear test.
Take Away: So far, the South is still seeking a peaceful resolution but the unease is palpable. The South Korean military has already conducted a military drill in response to the North’s nuclear test. Watch out for further responses from the South, the US and Japan, which could further rattle markets.
In India, a cabinet member shake-up is under way, as Prime Minister Narendra Modi’s government is under heavy pressure after a recent border stand-off with China and sluggish economic growth in the country following a series of policies, including a cashless campaign. Former Minister for Commerce and Industry Nirmala Sitharaman has been appointed as the first female head of defense.
Take Away: Modi is likely to further place key people in economic and defense positions to meet the country’s rising tensions with neighbors like Pakistan and China and revamp the domestic economic growth, once the fastest among major economies.
Featured image from Flickr.