APAC Market Wrap - Mar 20

China: Mainland markets closed higher on Tuesday. The Shanghai Composite rose 0.65% to 4,123.14, while the Shenzhen Component surged 2.04% to 14,354.07. The ChiNext Index led the rally, jumping 3.04% to 3,306.14. Sector-wise, co-packaged optics (CPO), printed circuit boards, and commercial aerospace outperformed, whereas energy sectors—including oil, gas, and coal—faced significant selling pressure.

 

Hong Kong: The Hang Seng Index and HSCEI tracked sideways with a slight downward bias. Technical sentiment remains cautious as markets monitor the evolving situation in the Middle East.

 

Japan: The Nikkei 225 finished at 54,248.39, reflecting a pause in its recent hot streak. High energy input costs due to the Iran conflict are weighing on operating margins, though analysts suggest the impact may be confined to Q2 as OPEC looks to increase supply.

 

South Korea: The KOSPI suffered a massive sell-off earlier in the week, diving nearly 6% to 5,251.87 amid surging oil prices, though it saw a technical rebound toward the 5,800 level as immediate fears of a prolonged strike on energy infrastructure eased.

 

Australia: The S&P/ASX 200 closed at 8,428, hit by weakness in mining and banking. Heavyweights BHP and Rio Tinto weighed on the index, though energy stocks bucked the trend to hit their highest levels since early 2024.

 

Singapore & Malaysia: The Straits Times Index (STI) closed 2.2% higher at 4,937.68, and the FTSE Bursa Malaysia KLCI advanced 1.6%, both buoyed by a temporary pullback in oil prices following diplomatic signals from the U.S.

Key Events

Gold’s Bull Case Remains Intact Despite War Volatility

 

While the U.S.-Iran conflict has pressured gold prices recently due to a stronger dollar and rising yields, analysts argue the "secular bull market" is just beginning.

 

Tavi Costa, CEO of Azuria Capital, views the current correction as mere market noise. He emphasizes that record government debt and central bank accumulation are structural forces that will eventually drive bullion to new highs.

 

South Korea Warns of Potential Fuel Export Bans

 

Moon Shin-hak, South Korea's Vice Minister of Industry, stated that the nation remains in an "emergency state" regarding crude supply.

 

With the Strait of Hormuz facing potential prolonged disruptions, Seoul is considering adjusting domestic refinery supplies or imposing export restrictions on petroleum products to ensure national energy security.

 

Oil Prices and the Global Recession "Red Line"

 

The primary concern for economists is the "threshold of pain" for oil prices. A recent survey suggests the probability of a U.S. recession within the next 12 months has climbed to 32%.

 

While Goldman Sachs maintains that price risks are skewed to the upside—with $100+ oil a distinct possibility—their base case assumes a gradual recovery of flows by Q4 2026, bringing Brent back to the $70 range.

Institutional Views

Goldman Sachs: Predicted the Bank of England will hold rates steady throughout 2026, scrapping previous forecasts for a July cut. Rates are expected to remain elevated until 2027, eventually settling near 3%.

 

ING: Noted that while geopolitical tension usually supports gold, current high energy costs are acting as a drag by fueling inflation and dampening hopes for near-term rate cuts.

 

Bank of America: Chief Strategist Michael Hartnett believes the sell-off in consumer discretionary stocks has fully priced in stagflation, making it a "best-in-class" buying opportunity. He dismissed talk of a Fed rate hike as "nonsense," suggesting the S&P 500 at 6,600 represents an ideal entry point for long-term investors.