Asian stocks edge up as US trade deals, fiscal health in focus
ASIAN equities edged higher on Wednesday, with risk appetite contained by elevated bond yields as investors remained nervous about the fiscal outlook of major developed economies and the lack of progress on fresh trade deals.
Crude prices rose more than $1 a barrel after a CNN report said that Israel was preparing a strike on Iranian nuclear facilities, raising supply concerns out of the key Middle East producing region and bringing geopolitical concerns back into focus.
All eyes are also on the Japanese bond markets, a day after yields on super-long tenors surged to record highs on worries about demand for the country's debt after a weak 20-year auction.
In early trading on Wednesday, the yield on 20-year bonds edged up 2 basis points, while those on the 30-year JGB slipped 1.5 bps.
In stocks, China's blue-chip index was muted in early trading, while Hong Kong's Hang Seng Index rose 0.58%.
China said it could take legal action against any individual or organisation assisting or implementing U.S. measures that advise companies against using advanced semiconductors from China.
The MSCI's broadest index of Asia-Pacific shares outside Japan crept up 0.5%, while Japan's Nikkei was down 0.18%.
"The markets are hungry for new catalysts to pique further risk appetite," said Kyle Rodda, senior financial market analyst at Capital.com.
"The U.S.'s backflip on trade policy and the damage control that it went into to clean up the mess it created with the Liberation Day tariffs signals a determination to get all of this done. That's what is keeping equity valuations well supported."
Data on Wednesday showed Japanese shipments to the U.S. fell in April even as exports rose for the seventh straight month, highlighting the toll President Donald Trump's tariffs could take on the fragile economic recovery in Japan.
Fiscal woes were also reflected on Wall Street, with the benchmark S&P 500 snapping a six-day winning streak on Tuesday, limited by a rise in U.S. Treasury yields, which were steady in Asian hours on Wednesday.
A tax bill that could add about $3 trillion to $5 trillion to the U.S. federal government's mushrooming $36.2 trillion debt load is expected to be voted on later this week in Congress, just days after Moody's became the latest agency to lower the country's credit rating.
Analysts also noted that any progress on new trade deals between the U.S. and its trade partners could fuel risk appetite, although concerns were that Trump's policies could have already damaged the global economy.
On Tuesday, U.S. Federal Reserve officials said that higher prices were coming on the back of rising U.S. import tariffs and counselled patience before making any interest rate decisions.
Traders were also wary of U.S. officials angling for a weaker greenback at Group of Seven finance minister meetings currently underway in Canada.
In Europe, STOXX 50's futures were steady while FTSE 100 futures were muted, with caution setting in ahead of a consumer inflation report expected later in the day out of the United Kingdom.
Economists polled by Reuters forecast the consumer price index to rise 3.3% in April from the previous month's 2.2%.
The dollar index, which measures the U.S. currency against six other units, edged down 0.03% to 99.938, following a 1.3% two-day decline. The Japanese yen strengthened to 144.27 per dollar, hovering near its strongest level in two weeks.
Gold prices rose on Wednesday as the dollar weakened and investors flocked to safe-haven assets. Spot gold was 0.14% at $3,293 per ounce, the highest in more than a week. - Reuters
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
New Straits Times
2 hours ago
- New Straits Times
Asia could outstrip Europe as key beneficiary of US capital flight
AS global investors consider reducing their exposure to United States financial assets, the key question is where money flowing out of the US will go. While Europe may be the obvious destination, relative value metrics may favour emerging Asia. Even though US equities have recovered from the steep losses suffered in the week following US President Donald Trump's announcement of his "Liberation Day" tariffs, the same cannot be said of the US bond market. Since hitting a recent low on April 4, the 10-year Treasury yield has spiked by around 50 basis points, with bond investors demanding more compensation for the risk of holding longer-dated US debt. Worryingly, the benchmark Treasury yield has surged higher than nominal US gross domestic product growth — a key risk measure. Additionally, the usual positive correlation between Treasury yields and the US dollar has broken off, as rising yields are no longer attracting money to the "safest" asset in the world. The euro's almost 10 per cent rise against the dollar this year suggests that a significant portion of the capital flowing out of the US is going to Europe, likely driven by concerns about US policy as well as expectations of higher regional growth. Further monetary easing by the European Central Bank should promote economic activity, as should the expected surge in fiscal spending. The fiscal splurge is already offering a boost to European equities — the surprise winner thus far in 2025 — especially defence, industrial and technology stocks. Meanwhile, in emerging Asia — another potential destination for US capital outflows — the debt picture is better and the growth outlook is stronger. Government debt in many Asian countries is low, ranging from 37 per cent of GDP in Indonesia to around 85 per cent in China and India. Benchmark bond yields across the region have been declining since October 2023, speaking to fixed income investors' limited concerns about Asian countries' fiscal situations. In fact, yields in China, Thailand and Korea are all below those in the US, though those in Indonesia and India remain higher. Modest debt burdens mean there is also plenty of room for more fiscal stimulus in many countries, which could improve consumption, while the benign inflation environment should enable central banks in the region to continue cutting rates to stimulate growth. Emerging Asia also offers far more high-growth, technology companies than Europe. The release of the affordable Chinese artificial intelligence model, DeepSeek, Beijing's focus on semiconductors and advanced manufacturing and the country's electric vehicle dominance could all attract tech-focused investors looking for an alternative to the US. Even though European equities have outperformed their US counterparts significantly in 2025, the 12-month forward price-to-earnings multiple of the major European index, the STOXX50, is considerably lower than that of the S&P 500, at 15.4x and 21.0x, respectively, as of May 23. But the major emerging Asia equity index, the MSCI Asia ex Japan, is even cheaper at 13.4x. Moreover, earnings growth forecasts are higher in Asia than in either the US or Europe through 2026. Finally, reallocation of assets from the US could have a bigger positive impact on Asia than on Europe because of their relative sizes. Let's say five per cent of the US free floating market cap of around US$58 trillion, or roughly US$3 trillion, moves out. That would represent 36 per cent of Asia's market cap, but only 22 per cent of Europe's. Caution remains warranted, though. Asian nations' trade negotiations with the US will likely still encounter twists and turns, and increasing protectionism could hinder the region's more export-oriented economies. The capital flowing into emerging Asia is a double-edged sword because of the impact on Asian currencies versus the US dollar. If Asian currencies strengthen much more, the region's export engine could stutter. Investors, thus, have to keep a close eye on macroeconomics, geopolitics and policy statements, not just valuation metrics. But given emerging Asia's benign debt environment and positive growth outlook, both the region's equity and fixed income markets have the potential to benefit from the death of American exceptionalism.
The Star
3 hours ago
- The Star
Continuity or reset? Japan, China seek clues to S. Korea President Lee Jae-myung's foreign policy
TOKYO/CHONGQING: South Korea's East Asian neighbours Japan and China on Wednesday (June 4) quickly congratulated President Lee Jae-myung on his resounding election win, even as both countries are closely watching for clues to how the liberal leader will approach bilateral relations. This scrutiny stems from perceptions that South Korean diplomacy oscillates wildly, depending on the ruling party of the day. Liberals are judged to be hostile towards Japan and friendly towards China and North Korea, while conservatives hold an opposite view. Ties between Tokyo and Seoul plunged into a deep freeze under the previous liberal president Moon Jae-in, only to thaw rapidly under Lee's ousted predecessor, Yoon Suk Yeol, who is now facing insurrection charges for his martial law debacle. Lee had previously described Japan as an 'enemy nation' and gone on a 24-day hunger strike to oppose Yoon's conciliatory policies, which he termed 'humiliating diplomacy'. He has also criticised Yoon for worsening ties with China by moving closer to the United States on positions such as Taiwan, which Beijing regards as part of its territory to be reunited with. But Lee adopted a more centrist agenda on the campaign trail, saying that he wanted to repair fraying ties with China, while also insisting that he held a 'very favourable impression of the Japanese people'. His approach to this diplomatic tightrope will have ramifications from Washington to Tokyo, as the US corrals its Indo-Pacific allies for support in its big-power competition with China. Both Japan and South Korea are US security allies, while China is their largest trading partner. On June 4, Lee said: 'I will strengthen cooperation between South Korea, the US and Japan, based on the solid South Korea-US alliance, and will approach relations with neighbouring countries from the perspective of national interest and practicality.' All eyes will be on Lee's likely diplomatic debut on June 15 at the Group of Seven (G-7) summit in Canada, where South Korea has been invited as an observer. There, he could potentially meet bilaterally with US and Japanese leaders. Amid the diplomatic ambiguity, analysts in China were sanguine about Beijing-Seoul ties, while Japanese observers were more circumspect over bilateral relations. In a congratulatory message to Lee, Chinese President Xi Jinping stressed that he attaches 'great importance' to China-South Korea relations. The two countries, he said, are close neighbours and partners that have overcome ideological and social differences in the 33 years since establishing diplomatic ties to develop stable and healthy relations. This partnership 'not only improved the well-being of the citizens in both countries, but also promoted regional peace and stability', Xi added, according to state media reports. 'China is willing to work with South Korea to adhere to the original intention of the establishment of diplomatic ties and firmly follow the rules of good neighbourliness and friendship,' Xi said, noting that this is to the benefit of both countries at a time of growing regional and international uncertainty. Over in Tokyo, Japanese Prime Minister Shigeru Ishiba delivered a similar message of working together as 'partners' and close neighbours to tackle global challenges, as the countries celebrate the 60th anniversary of bilateral ties in 2025. 'The importance of holding summit talks at an early date and engaging in 'shuttle diplomacy' won't change,' Ishiba said, referring to the practice of the leaders regularly visiting each other's countries, while expressing his hopes to 'further invigorate bilateral exchanges' at all levels. Yet, Japanese officials are wary that Lee's election would portend a dramatic shift in bilateral ties, given that he has said he would broach wartime issues over Japan's colonial rule of the Korean peninsula from 1910 to 1945, and the territorial dispute over the Dokdo/Takeshima islets. This is especially since 2025 marks the 80th year since Japan's wartime surrender, an anniversary year that could be weaponised to stoke tensions by raising historical grievances. Japan's position is that all wartime reparations have been 'completely and finally' settled under a 1965 agreement to normalise ties, with Tokyo paying US$500 million (worth about US$5 billion today, or S$6.4 billion) in grants and low-interest long-term loans to South Korea. But past South Korean administrations have repeatedly brought up historical issues, including comfort women and wartime labour, casting a pall over bilateral relations. 'Even if the administration takes a conciliatory stance towards Japan at the start, it could gradually evolve into a hardline stance towards Japan,' a Japanese Foreign Ministry official was quoted as telling the Mainichi newspaper. Another official was cautiously optimistic, saying it would be foolhardy to stoke anti-Japan sentiment at this time, given the positive public opinion. North Korea's military involvement in Russia's invasion of Ukraine also means that geopolitical calculations would have changed, the official was cited as saying. Kobe University's Professor Kan Kimura told The Straits Times that the way forward is unpredictable, given that invoking history would be a non-starter for Japan. 'Lee's language over history and territorial disputes is going to be provocative,' he said. 'The question is whether both countries can delink history with economic and security issues.' He saw it in Seoul's interests to maintain close ties with Tokyo, saying: 'Given that South Korean public opinion towards China is worsening, North Korea is refusing to engage in dialogue with South Korea, and the US is exerting pressure including through tariffs, objectively speaking, South Korea has almost no diplomatic options.' Analysts in China told ST that ties will likely thaw between Beijing and Seoul under Lee, whom they expect will strike a better balance amid US-China competition. Associate Professor Zhang Guangxin at Zhejiang Gongshang University's East Asian Institute in Hangzhou noted that despite Yoon's pivot to the US that had chilled bilateral relations with China, trade between the two countries remains robust. Exports from South Korea to China grew 6.6 per cent in 2024 from a year ago, which underscores the robust trade relations, Prof Zhang noted. 'Lee's clear victory over the People Power Party (which Yoon belonged to) shows the South Korean public's desire for economic stability,' he said. Professor Kim Chang Hyun of the China-Europe International Business School in Shanghai, meanwhile, said business elites in South Korea no longer see China solely as a big market for their products but also as 'an important partner to learn from', pointing to China's advances in green technology and artificial intelligence. The two experts said that public opinion in South Korea towards the US is likely deteriorating, given US President Donald Trump's demands that Seoul pay more for defence, and the threat of 'reciprocal tariffs' of 25 per cent. Students from South Korea – the third-largest source of foreign students to the US – are also facing heightened uncertainty over Trump's immigration policies. 'There will be some rebalancing in public opinion in South Korea towards the US now,' Prof Kim said. - The Straits Times/ANN
Free Malaysia Today
4 hours ago
- Free Malaysia Today
Shahriman denies ‘blowing hot and cold' over collateral for Sapura tower
Shahriman Shamsuddin wants the High Court to wind up Sapura Holdings Sdn Bhd citing a breakdown of mutual trust with elder brother Shahril. KUALA LUMPUR : Sapura Holdings Sdn Bhd director Shahriman Shamsuddin today insisted he was not inconsistent as regards using the group's Sapura@Mines property as collateral to fund its business ventures. Testifying in his petition to wind up Sapura Holdings on grounds of a breakdown of mutual trust with elder brother Shahril, Shahriman said he had objected to using the property as collateral for the development of the group's flagship office tower. In his petition, Shahriman had claimed that his 'strained relationship' with Shahril had been 'exacerbated' by the differing opinions they voiced over Project Apex at a special board meeting of Sapura Resources Bhd (SRB) on Jan 31, 2023. Project Apex was the codename given by SRB for its joint venture with KLCC Holdings Sdn Bhd to develop Permata Sapura, a 52-storey office building in the KL city centre. Lawyer S Rabindra, representing Shahril, then referred Shahriman to the minutes of that meeting. Rabindra: At various board meetings and in relation to loan proposals that we've already gone through, you voiced strong concerns and protested the use of Sapura@Mines as collateral for Sapura Holdings' financial assistance, particularly for Permata. Correct? Shahriman: Yes, for Permata. Rabindra: Yet, at the board meeting on Jan 31, 2023, you were comfortable with Sapura Resources using Sapura@Mines as collateral for new projects. Is that correct? Shahriman: For other projects that were going to yield (returns). Rabindra: So there was a risk, according to you, that using Sapura@Mines as collateral for Permata could lead to a loss of the property, but here, you were quite happy to suggest using the same property for new ventures, despite the same risk. Correct? Shahriman: Not correct. Rabindra: But it is the same risk. There is still the possibility of losing the property. Shahriman: We know the negative risk of Permata. But there were other projects that we could have gone into. Rabindra: I suggest to you that you were blowing hot and cold with respect to the use of the Sapura@Mines property as collateral. Shahriman: I disagree. Shahriman also agreed that, in essence, he had wanted SRB to exit Project Apex, while Shahril wanted to remain in it. Rabindra: I'm suggesting to you that this was a difference of opinion between two directors of a public-listed company about what they see as being in the best interest of the company. Do you agree? Shahriman: Agree. That was a difference of opinion. Rabindra: And this was openly discussed at the Jan 31 board meeting. Correct? Shahriman: Yes. Rabindra: So it essentially came down to a commercial disagreement between two directors on a matter of business judgement based on what is best for SRB? Shahriman: On a matter of business judgement, a difference of opinion, yes. Sapura Holdings is the parent entity of over 40 subsidiaries valued at RM832 million, including the publicly-listed SRB. Both Shahril and Shahriman hold a 48% stake each in Sapura Holdings, with the remaining 4% owned by Rameli Musa. In the petition filed last September, Shahriman claims that an irreparable breakdown of mutual trust and confidence between him and Shahril necessitated the dissolution of Sapura Holdings. However, Sapura Holdings, Shahril and Rameli, all named as respondents, oppose the petition, contending that the company was never intended to be a family business and that dissolution would be neither just nor equitable. The hearing before Justice Leong Wai Hong continues.
