How China Moves The Federal Reserve And U.S. Elections: U.S. Economy Stuck On Asian Contractions

Asian stocks may rise in 2024, supported by interest rate cuts and a weak US dollar, but China It will be the deciding factor for the performance of the region.

Attention is focused on the ability of the world’s second largest economy to recover and reform the sectorReal estate after three years of record losses that left the MSCI Asia-Pacific Index lagging global stocks by 11 percentage points.

As the markets look in India, South Korea and Taiwan to growth exceeding 10%. The shift in Japanese monetary policy may change the performance of its export companies, which witnessed their best performance since 2013.

Below we review five areas that equity investors in Asia will focus on over the course of 2024:

China’s recovery

After another disappointing year for those betting on the rise of the Chinese market, investors will follow the meetings of the National People’s Congress and its third plenary session regarding the growth goal in Beijing during 2024 and signs of introducing financial stimulus programs.

China’s outlook remains challenging, but Beijing has failed to launch stimulus programs on a larger scale than the market had hoped. Speculators are pinning their hopes on People’s Bank of China to adopt a more accommodative monetary policy, although any impact on the market has not lasted long so far.

Surprising draft regulations for the video game sector last December renewed concerns about Beijing’s stance on private sector enterprises, while the semiconductor and clean energy sectors may continue to face risks if geopolitical tensions with the West escalate.

Monetary policy shifts

It will be statements U.S. Federal Reserve Bank caution and the strength of the US economy’s performance are important to determine the directionUS dollarAnd interest rates in Asia, and will boost demand for the region’s stocks. Although the minutes of the US Central Bank’s last meeting showed an increase in optimism among US monetary policymakers regarding the path of inflation, there was no sign of an imminent interest rate cut next March.

Investors will also be looking for a signal from portfolios in the Central Bank of Japan to finally abandon sub-zero interest rates. His comments last month suggest he may make his decision as soon as next April. Rising borrowing costs may strengthen the exchange rateJapanese Yen. It harms the shares of export companies that control the market index, which frustrates the continued rise of Japanese stocks.

A series of elections in key market countries including India, Indonesia, South Korea and Taiwan during the first half of this year are prompting investors to focus on political risks.

Taiwan’s elections this month are expected to shape relations between United States of America and China, while in India and Indonesia Investors are betting on the continuation of pro-growth policies of Prime Minister Narendra Modi and President Joko Widodo, respectively.

The impact of legislative elections on South Korea scheduled for next April is already beginning to appear through the ban on short selling operations with the aim of protecting individual investors. President Yoon Suk-yeol has pledged to abolish a planned capital gains tax on income from financial investments and promised reforms that include changes to the pension system and preventing monopolistic market practices.

India’s momentum

India remains a bright spot even as major stock market indices reach record levels after 8 years of continuous rise.

Optimism prevails among global investors, as India signs major manufacturing contracts, expands infrastructure spending and emerges as an alternative power to China.

It is widely expected that Modi’s party will win the elections expected next April or May, especially in the wake of its victories in recent state-level elections. Investors are exposed to the risk of a significant market correction—25% or more, according to Jefferies—if the administration suffers a surprise defeat.

Chip concerns

The success of the GPT chat app has sparked a sudden boom in chip manufacturing stocks in 2023. Now, the onus is on Taiwan Semiconductor Manufacturing and Samsung Electronics, the global chip manufacturing giants, to determine the impact of growing demand on the field. Artificial intelligence on profits.

In addition, the increase in demand from the United States and China will play a pivotal role in the extent of continued optimism towards chip exporting companies, especially after South Korea witnessed the largest jump in chip production and exports in years last November, indicating a sustainable upward trend for the semiconductor cycle.