Jan 31, 2024: On Wednesday, Asian shares experienced a broad decline, with the Australian dollar sliding following unexpectedly soft inflation data. Japanese government bond (JGB) yields also ticked higher, fueled by growing speculation of an imminent policy shift from the Bank of Japan (BOJ).
Chinese markets faced instability after an official factory survey revealed a fourth consecutive month of contraction in China’s manufacturing activity, reflecting the challenges in the world’s second-largest economy as it strives to regain momentum.
MSCI’s broadest index of Asia-Pacific shares outside Japan slipped by 0.4%, heading for a monthly loss of approximately 5%, breaking a two-month winning streak. This decline was partly attributed to a significant sell-off in Chinese stocks this month, driven by concerns over the lack of substantial stimulus measures from authorities to support the economy and low investor confidence. Beijing intervened to stabilize its declining market, indicating a renewed commitment to preventing further declines.
Mark Matthews, Head of Research for Asia at Bank Julius Baer, highlighted a noticeable shift in authorities’ approach to market stabilization, indicating a departure from their previous strategy.
China’s blue-chip index, which reached its lowest point since 2019 earlier in the month, was down approximately 6% for January, marking its sixth consecutive monthly decline—a record losing streak. Hong Kong’s Hang Seng Index also faced a decline of over 1%, driven by pressures on property and tech sectors, marking its worst January performance since 2016 with a 9% loss.
In Japan, the BOJ’s January meeting summary of opinions suggested discussions on the likelihood of a near-term exit from negative interest rates and potential scenarios for phasing out the massive stimulus program. JGB yields responded by edging higher, with the two-year JGB yield reaching its highest level since December 11.
Maybank analysts noted that market perceptions are leaning towards Governor Kazuo Ueda favoring gradual shifts, as discussions on policy adjustments gain momentum.
