In today’s briefing:
- Taking Stock of Monetary Policy in Asia
- Changes in Portfolio Weights: Sentiment Hits ‘Frenzy,’ We Comply
- Asian Currencies Remain Stable but China-Led Upsides Are Limited
- CX Daily: Sands of Time Ticking on China’s Fight to Hold Back the Desert
- Gold & Silver
Taking Stock of Monetary Policy in Asia
- Central banks in Asia have mostly called a pause to monetary tightening due to easing headline inflation, but sticky core inflation is a risk even as growth headwinds mount.
- Some central banks will continue to keep rates “higher for longer” to provide support for their respective currencies, or to minimize volatility in capital flows.
- We discuss the trajectories for monetary policy in selected Asian economies, including how they may differ from theoretical Taylor-Rule prescriptions for policy rates.
Changes in Portfolio Weights: Sentiment Hits ‘Frenzy,’ We Comply
- Our Fear & Frenzy Sentiment Index hit Frenzy for the first time during this rally.
- We marginally lower the weight of Developed Market Equities since we are already underweight risky assets, which, unlike 2022, has not paid off this year.
- In addition, we close our inflation-linked bond and Yen trade.
Asian Currencies Remain Stable but China-Led Upsides Are Limited
- The imminent pause by the US Fed and Asian central banks means that monetary policy and the resultant rate differentials will play less of a factor in currency performance.
- Hoped-For upsides from China, however, are not forthcoming given the faltering recovery. This also manifests in softer commodity markets that compound a broader trade slump.
- Asian markets have nonetheless been able to improve their currency fundamentals, notably via a replenishment of reserves and more substantial progress in disinflation.
CX Daily: Sands of Time Ticking on China’s Fight to Hold Back the Desert
- Sandstorms /: Cover Story: Sands of time ticking on China’s fight to hold back the desert
- China-U.S. /: China and U.S. move to ratchet down tensions
- Economy /: China’s cabinet proposes stronger measures to boost recovery momentum
Gold & Silver
- Gold and silver prices have been drifting lower as investors have shifted their focus to riskier assets.
- Earlier this year, the rise in gold prices was driven by stable yields, anxiety from regional bank stress, and a preference for real or liquid assets as reliable investment options.
- However, the current robustness of nominal and real yields, equities, and credit has left precious metals vulnerable.
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