APAC Market Wrap - 17 Sep

 

China Stock Market:At close, the Shanghai Composite rose 0.37%, the Shenzhen Component Index gained 1.16%, and the ChiNext Index climbed 1.95%.

 

Sector-wise, lithography machines, wind power, and robotics led the gains, while precious metals, tourism, and pork saw the largest declines.  

 

Hong Kong Stock Market:The three major Hong Kong indices posted strong gains. At close, the Hang Seng Index rose 1.78% to 26,908.39 points; the Tech Index surged 4.22% to 6,334.24 points; and the State-Owned Enterprises Index increased 2.24% to 9,596.77 points.  

 

Market performance showed strength in lithium batteries, chips, aviation, photovoltaics, and consumer electronics, while gold stocks weakened.  

 

Japan Stock Market:The Nikkei 225 fell 0.25% after five consecutive trading days of gains, closing at 44,790.38 yen, down 111.89 yen.  

 

By sector, aviation transport, retail, and transport equipment rose, while 29 sectors including non-ferrous metals, electric power and gas, insurance, other products, and steel declined.  

 

South Korea Stock Market:The KOSPI index dropped 1.05% to 3,413.40 points.

 

Utilities, hotels, and gaming led the gains, while display panels, life insurance, and biotechnology lagged.  

 

Australia Stock Market:The S&P/ASX 200 (XJO) fell 0.67% to 8,818.500 points.

 

Sectors like industrial products, semiconductors, and furniture advanced, while aerospace, forestry products, apparel, and restaurants saw slight declines.  

 

Singapore Stock Market:The Straits Times Index dipped 0.02% to 4,337.74 points.

 

Semiconductors, industrial products, and pharmaceutical manufacturers saw slight gains, while non-alcoholic beverages, consumer packaged goods, and cyclical retail experienced larger drops.  

 

Malaysia Stock Market:The FTSE Malaysia KLCI rose 0.72% to 1,611.70 points. Consumer goods and services, healthcare, and industrial goods and services advanced, while communications and media, and construction declined.  

Key Events  

Major Funds Warn Tariff Impact Underestimated, Record Asia Stock Rally May Stall  

 

Several large funds in Asia suggest that the record-breaking rally in Asian stocks faces growing pressure as tariffs imposed by Donald Trump begin to erode corporate profits.  

 

Firms like Principal and Franklin Templeton argue that the market has underestimated the impact of US tariff hikes on business earnings, with exports likely to be restrained in the coming months.  

 

“Current exporter profits and margins haven’t fully reflected the impact of recent tariff agreements,” said Clarence Li, Senior Portfolio Analyst at Principal’s Hong Kong equities team. “As a risk management strategy, we’ve reduced exposure to heavily export-dependent companies in our Asia and emerging market portfolios.”  

 

Indonesia Central Bank Unexpectedly Cuts Rates to Boost Economy  

 

Indonesia’s central bank unexpectedly cut rates again, signaling room for further reductions, shifting focus from addressing rupiah weakness to stimulating the economy amid violent protests over unemployment and low wages.  

 

The bank lowered its benchmark rate by 25 basis points to 4.75%, a move anticipated by only two of 38 surveyed economists. This marks the third consecutive rate cut at policy meetings, with borrowing costs reduced by 150 basis points over the past 12 months.  

 

South Korean President Lee Jae-myung Pledges Expanded Support for Startups, Aims for “Third Entrepreneurial Wave”  

 

South Korean President Lee Jae-myung said on Wednesday that the government will boost support for innovation and entrepreneurship by stimulating the venture capital market and establishing entrepreneur funds.  

 

During a meeting with startup executives at the Startup Plaza in Seongnam, Seoul, Lee made this commitment.  

 

He stated, “(The government) will strive to usher in an era of a ‘third entrepreneurial wave’ led by startups to drive future economic growth. We will support the passion of young entrepreneurs.”  

 

Largest Block Trade Ever! “Mystery Trader” Bets on 50bp Fed Cut Tonight  

 

Reports indicate a “mystery trader” is hedging against a super-dovish surprise in this week’s Federal Reserve decision on the CME Fed futures market. Researcher Ed Bolingbroke found that Monday’s fund flows at the curve’s front end marked the largest-ever block trade in federal funds futures.  

 

The trade involved 84,000 October federal funds futures contracts, equating to a $3.5 million risk exposure per basis point.  

 

Bolingbroke noted that the trade’s price and timing align with buyer characteristics. Given that swap markets have fully priced in a 25-basis-point cut, this move may signal the trader is hedging against a potential 50-basis-point cut in Wednesday’s Fed decision.  

Institutional Views  

Goldman Sachs: Expects Only Slight Drop in Russian Oil Production  

 

Uncertainty around secondary tariffs on Russian crude remains high, but Goldman Sachs predicts only a modest decline in Russian oil output. Analysts said, “Asian buyers continue to show willingness to import Russian crude.” They noted greater risks from shrinking producer profits and operational bottlenecks due to existing sanctions.  

 

Goldman added that Ukrainian drone attacks have amplified risks—stagnating about 300,000 barrels per day of refining capacity from August to September. Analysts warned that if refinery processing drops and storage or export channels hit capacity limits, Russian upstream producers may be forced to cut output.

 

Jefferies: Market May Lower Rate Cut Expectations if Powell Highlights Uncertainty

 

Jefferies strategist Mohit Kumar said the focus remains on the Fed’s Wednesday meeting, with Powell’s tone being key. “If Powell emphasizes inflation risks or uncertainty around economic and inflation outlooks, we could see markets scale back rate cut expectations.”  

 

Exness: Gold Prices May Hit New Highs if Fed Confirms Multiple Cuts  

 

Gold prices surged past $3,700 per ounce on Tuesday, hitting a record high, driven by a weaker dollar and clear market expectations of a Fed rate cut. Exness strategist Eric Chia said, “If the Fed’s guidance falls short of dovish expectations, gold could face short-term selling pressure. But confirmation of multiple rate cuts would support further gains, potentially pushing prices to new highs.”  

 

ANZ: Japan Central Bank Likely to Hold Rates Steady for Rest of Year  

 

ANZ Senior International Economist Tom Kenny said in a report that the Bank of Japan is likely to keep its policy rate unchanged for the remainder of the year. He cited heightened uncertainty from US tariffs on the Japanese economy and domestic political instability, which may keep the bank sidelined until next year. The last rate hike was in early 2025.

 

Kenny noted that a key reason for pausing is the bank’s downward revision of its 2026 fiscal year inflation forecast, now below the 2% stability target, signaling reduced confidence among policy board members in achieving price stability. ANZ has delayed its expectation of a 25-basis-point hike from October 2025 to January 2026.