Asia-Pacific Stock Markets Rebound Strongly as Market Risk Appetite Improves
Asia-Pacific stock markets generally strengthened last week, with investor sentiment bolstered by a series of positive factors. From the temporary suspension of reciprocal tariffs by the U.S., U.S. stock earnings surpassing expectations, to the appearance of accommodative signals in Southeast Asian countries' policies, regional market risk appetite has significantly improved. Notably, markets in Thailand, Indonesia, Singapore, and Vietnam performed exceptionally well, recording weekly gains of over 2%, reflecting the capital market’s provisional recovery in short-term economic expectations.
A researcher from the Chinese Academy of Social Sciences pointed out that the uncertainty over the Fed's rate cut schedule within the year and the weakening trend of the U.S. dollar have effectively alleviated the pressure of capital outflow from the Asia-Pacific region, while the region's fundamental support remains strong. The markets, particularly those in Thailand due to tourism recovery and in Indonesia due to the conclusion of trade agreements, have responded positively.
Malaysia and Indonesia's Central Banks Act First, Monetary Policy Shifts to Easing
Amidst weakening regional growth momentum, the central banks of Malaysia and Indonesia have both implemented rate cuts as a preventive measure to counter potential external shocks. On July 9, Bank Negara Malaysia announced its first rate cut in two years, reducing rates to 2.75% to mitigate the potential pressure on domestic growth from global uncertainties. The central bank emphasized that domestic inflation is moderate, but the export-driven economy needs to address the spillover effects of external risks.
Soon thereafter, on July 16, Bank Indonesia announced a reduction in the benchmark interest rate to 5.25%. This marks the fourth rate cut by the central bank since September 2023, signaling its strong intent to stabilize domestic demand and rebuild business confidence. Analysts believe the combination of rate cuts and improving U.S.-Indonesia trade relations could herald a turning point for foreign capital inflow into Indonesia.
Southeast Asian Stock Markets Volatility Increases, Foreign Capital Movements Need Attention
Despite the recent market rebound, foreign capital remains cautious. Data shows that in June, stock markets in Thailand, Indonesia, Vietnam, and the Philippines each recorded net outflows of several hundred million dollars, reflecting international investors' heightened sensitivity to global interest rate prospects and trade negotiation outcomes.
Singapore's market, however, has managed to create a certain hedge effect on the capital front with a stable Singapore dollar exchange rate and strengthening of the real estate and REIT sectors, achieving a monthly gain of over 5%. However, overall, the Southeast Asian markets still face multiple challenges, especially as tariff negotiations and declining global demand will affect export performance in the second half of the year.
Japanese and South Korean Economies Under Pressure, U.S. Tariff Threats Linger
Apart from Southeast Asia, the economies of Japan and South Korea are also constrained by U.S. tariff pressures. Recently, the U.S. government sent a letter to Japan, warning that it would impose a 25% tariff on certain Japanese companies' products from August 1. Japan's exports to the U.S. in June have already plunged by 11.4%, with car exports dropping by more than 25%, casting a shadow over recent economic growth.
South Korea's economy is facing similar challenges. The GDP for the first quarter shrank by 0.2% quarter-on-quarter, and although the government is attempting to counter recession risks with fiscal stimulus, structural problems persist, raising doubts in the market about the sustainability of these policies.
Easing Tone Cannot Mask Uncertainty
Looking ahead, the Asia-Pacific market may maintain a volatile upward trend, but its pace will be more influenced by global policy signals and regional negotiation progress. Variables such as the Fed's interest rate meetings, Japan-U.S. tariff negotiations, and ASEAN export data will directly impact capital flows.
Overall, the preliminary rate cuts by Malaysia and Indonesia have sent positive signals for the region, but to establish a solid bullish pattern, continuous improvements in fundamental data such as consumption and investment are still needed. Investors should closely monitor changes in U.S. bond rates, the direction of the U.S. dollar, and the potential pullback risks posed by a weakening global demand trend.
