Asian Market Update – Wednesday: Asian stocks mixed as investors await Fed’s monetary policy clue

Asian stocks mixed

The Big Question: Will the US Federal Reserve keep rates steady?

Major Asian indexes were mixed at midday in Asia on Wednesday, as investors adopted a wait-and-see mood ahead of a meeting of the US Federal Reserve set for Wednesday afternoon US Eastern time, when the FOMC will announce its monetary policy stance on a press conference.

In Japan, the Nikkei 225 was up 0.04 percent at 20,306 at midday.

In Greater China, stocks made slight gains. The Shanghai Composite Index edged up 0.17 percent to 3,362 before midday. In Hong Kong, the Hang Seng Index gained 0.31 percent to 28,137.

In South Korea, the KOSPI slipped a slight 0.09 percent to 2,413.

Down under, the ASX 200 slid 0.13 percent to 5,706.

The US Fed is scheduled to announce its monetary policy at 6 PM GMT time press conference, following a two-day meeting. At the moment, market expectation is that the Fed will not change the current interest rates. Still, until the decision is announced, investors will wait before make any big moves.

Also, investors will try to find clues in the Fed’s dot plot about projections of rate hikes for December.

Another thing that most investors would look for is a possible unwinding of the Fed’s massive $4.5 trillion balance sheet, mostly Treasuries and mortgage-backed securities accumulated during the financial crisis in 2008.

Expectations are high that the Fed will start to unwind its balance sheet, but investors would look for more details. Some analysts warn things could go wrong as well, depending on how the Fed is going to do it.

Also let’s not forget the lingering geopolitical tension on the Korean Peninsula. Though markets remained calm, investors likely paid much attention to a speech by US President Donald Trump at the UN General Assembly on Tuesday.

Trump threatened that the US military would “totally destroy” North Korea and its “Rocket Man” if forced to do so. Trump’s “Rocket Man” don’t take such threats well. Previous cases show that Kim Jong-un will respond, probably fire another missile and that could rattle markets at least for a short period of time.

Main Market Movers – Midday Asian Trading Session

Indexes Value at Midday Daily Change
Japan-Nikkei 225 20,306.53 0.04%
China-Shanghai Composite Index 3,362.55 0.17%
Hong Kong –Hang Seng 28,137.17 0.31%
Australia-ASX 200 5,706.00 -0.13%
South Korea-KOSPI 2,413.79 -0.09%

Cryptocurrencies

Prices of cryptocurrencies were flat overnight during the Asian trading session on Wednesday.

At midday in Asia, the bitcoin price was up by 0.15 percent, changing hands at $3,894. The digital currency has been on a downward trend since Monday night, dropping from its most recent high of about $4,100.

Meanwhile, Ray Dalio, founder of Bridgewater Associates, reportedly said that there is a bubble in the bitcoin market.

The price of ethereum was down 0.43 percent to $281.40 at midday in Asia. Tracking closely the price of bitcoin, the virtual currency has also been on a downtrend since Monday, when the price fell from a high of about $298.

Cryptocurrencies still face looming regulatory uncertainties, though they have shown strong resistance against regulatory tightening out of China.

Regulatory uncertainties are still lingering, as US regulators are schedule to discuss blockchain technology at a meeting in mid-October.

Currencies

The Japanese yen gained 0.12 percent against the US dollar at midday on Wednesday. The USD/JPY rate was at 111.46.

The Chinese yuan strengthened 0.19 percent against the US dollar to 6.5674. The yuan has been rising against the greenback since early morning Wednesday, after a four-day depreciation.

The Australian dollar gained 0.07 percent on the dollar, changing hands at 1.2474 per dollar at midday.

Commodities

WTI Oil was up 0.84 percent to $50.23 per barrel.

Brent Crude was flat at $55.37 per barrel.

Gold was up 0.15 percent to $1,312 an ounce.

Business News across Asia

In China, A logistics firm is making headlines as it announced its initial public offering in the US. Best Inc, which is backed by China’s Alibaba Group, is set to raise about $450 million in the US.

Take away: The firm had to price its IPO at the bottom of expectations because investors are not very attracted by some fast-rising firms after big losses in recent high-profile IPOs.

In Japan, Prime Minister Shinzo Abe is reportedly going to push back on a decision to balance the country’s primary budget in order to achieve a surplus in March 2021. Abe had proposed to raise sales tax from 8 percent to 10 percent in 2019 to pay the debt.

Take Away: The move is a key step for Japan to reduce its debt, which is about twice the size of its economy, according to Reuters.

Featured image from Max Pixel.

 

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.