Hang Seng Index, ASX 200, Nikkei 225 Index: Forecasting the Week Ahead After a Strong Market Open

Key Insights:

• Asian equity markets surged on Monday, led by the Hang Seng Index’s 2.51% rally, with ASX200 and Nikkei also gaining.
• Beijing’s latest stimulus measures and new department creation boosted investor optimism about the private sector.
• Anticipation builds around the RBA’s monetary decisions; past surprises have kept investors on edge.

Monday Overview

The Asian equity markets enjoyed a breakout start to the week. On Monday, the Hang Seng Index led the ASX and Nikkei into positive territory.

The market reaction to the US Jobs Report signaled a bullish opening. Rising US unemployment and softer wage growth fueled bets on the Fed ending its monetary policy tightening cycle.

The US equity markets had a mixed reaction to the Jobs Report. The NASDAQ Composite Index slipped by 0.02%. However, the Dow and the S&P 500 rose by 0.33% and 0.18%, respectively.

News of Country Garden’s new payment terms with creditors reduced default concerns. Additional stimulus from Beijing and its new department supporting the private economy boosted positivity. The private sector, a major nonrural job creator, would benefit from significant investment and support consumption and the economy.

The Asian Economic Calendar Set to Influence Investor Sentiment

The US markets closed for the Labor Day holiday on Monday. With no US economic indicators to consider, the US futures and the Asian economic calendar will be in focus this morning.

Service sector PMI numbers from China will influence investor sentiment. The flow of measures from Beijing has provided comfort. However, the jury is still out on whether the Government can reboot the economy.

Economists forecast the Caixin Services PMI to fall from 54.1 to 53.6 in August. A surprise pickup in service sector activity would raise hopes of the Chinese economy turning a corner.

However, economic indicators from Japan and the RBA interest rate decision will influence the Nikkei and ASX 200, respectively.

Japan’s household spending figures are anticipated. BoJ Governor Ueda emphasized wage growth and demand-driven inflation prior to adjusting ultra-loose policies. Higher-than-expected spending could prompt speculation on a BoJ policy change.

For the ASX 200, investors are betting on the RBA ending its monetary policy tightening cycle. However, the RBA is known for catching the markets by surprise. A hawkish pause would test buyer appetite.

Beijing Stimulus Examination

Following recent stimulus measures, markets will gauge the impact on China’s economy. Country Garden needs to restructure major offshore debts to stay viable, and other real estate firms face similar repayment challenges.

Investors will also need more details on the new government department to support the private sector. A lack of clarity could test the optimistic mood.

Investors Unlikely to Fret Over US Factory Orders

Later today, US factory orders are unlikely to influence the Fed. However, a larger-than-expected decline would need consideration. The US manufacturing sector accounts for less than 30% of US GDP, limiting the impact on Fed policy moves.

However, we expect the markets to be more sensitive to Fed chatter. While the markets are betting on the Fed hitting the brakes, the Fed hawks could plant seeds of doubt.

ASX 200

The ASX 200 gained 0.56% on Monday, with mining stocks among the front runners. Bank stocks had a subdued session, with investors mindful of the RBA.

The National Australia Bank (NAB) and Westpac Banking Corp (WBC) rose by 0.17% and 0.18%, respectively. ANZ Group (ANZ) also found support, gaining 0.08%. However, The Commonwealth Bank of Australia (CBA) led the way, ending the day up 0.65%. Elevated interest rates affect the credit environment and lending.

Mining stocks enjoyed a breakout session, with a China-fueled upswing in iron prices driving demand. Fortescue Metals Group (FMG) jumped by 4.66% as investors moved on from management woes. Rio Tinto (RIO) and BHP Group Ltd (BHP) rallied by 2.53% and 2.66%, respectively. Newcrest Mining (NCM) rose by a more modest 0.70%.

China is a large importer of iron ore. An improving demand outlook is favorable for Australian mining stocks.

Rising oil prices supported oil stocks. Woodside Energy Group (WDS) and Santos Ltd (STO) ended the day up 1.70% and 1.28%, respectively.

Hang Seng Index

The Hang Seng Index rallied 2.51% on Monday. Country Garden (HK 2007) surged by 14.61% to lead the way.

However, the main components enjoyed a positive start to the week. Alibaba Group Holding Ltd (HK:9988) and Tencent Holdings Ltd (HK:0700) gained 3.27% and 2.58%, respectively.

Bank stocks had another mixed session. The Industrial and Commercial Bank of China (HK:1398) and China Construction Bank (HK: 0939) saw gains of 3.61% and 3.33%, respectively. However, HSBC Holdings PLC bucked the trend, declining by 0.17%. Concerns over exposure to the China real estate sector weighed on HSBC.

Nikkei 225

(For reference purposes only)

The Nikkei 225 continued its upward trajectory, gaining 0.70%.

Bank stocks contributed to the positive session. Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group ended the day up 2.66% and 1.97%, respectively.

Looking at the main components, it was a mixed session. Sony Corp. (6758) and SoftBank Group Corp. (9984) saw losses of 0.16% and 1.31%, respectively.

However, Fast Retailing Co (9983) gained 1.53% on the latest stimulus plans from Beijing. KDDI Corp. (9433) and Tokyo Electron Limited (8035) rose by 0.44% and 0.23%, respectively.

Check out our economic calendar for economic events.