Economy
Asian Markets Await US Inflation Data Amid China Economic Concerns
Asian markets faced challenges on Tuesday (12 September) in their attempt to follow the positive trends in Wall Street and Europe. Investors are anxiously awaiting the release of US inflation data, while lingering concerns about China’s economy continue to weigh on sentiment.
The upcoming consumer price index (CPI) report holds significant importance as it influences the Federal Reserve’s policy decisions. The next Fed meeting is expected to result in interest rates being maintained, but market participants will closely analyze the accompanying statement for insights into the central bank’s future plans.
Equities have encountered difficulties this month due to fears that strong economic indicators and a robust job market may prompt the Fed to implement further tightening measures this year to combat inflation. The situation is further complicated by mixed signals from Fed officials, with some advocating for rate hikes and others favoring a wait-and-see approach to gauge the impact of over a year of rate adjustments.
Fed Chairman Jerome Powell has emphasized that decisions will be data-driven, causing investors to interpret weak economic data as positive news for the future interest rate outlook.
Chris Larkin, Managing Director of Trading and Investing at E*Trade from Morgan Stanley, noted, “This week is more likely to be a ‘good news is good, bad news is bad’ story. The market’s ability to rebound in the near term could hinge on this week’s inflation numbers, especially Wednesday’s CPI.”
Leading economists from major global banks have expressed the view that the Fed is unlikely to implement further rate hikes and may begin reducing borrowing costs in the new year. They also predicted that the United States will avoid a recession. Simona Mocuta, Chair of the 14-member American Bankers Association’s Economic Advisory Committee, stated, “Given both demonstrated and anticipated progress on inflation, the majority of the committee members believe the Fed’s tightening cycle has run its course.”
Meanwhile, tech firms led a surge in all three major indexes on Wall Street, while Asian markets displayed mixed performance. Tokyo, Taipei, and Manila saw slight gains, but Hong Kong, Shanghai, Seoul, Sydney, Singapore, Wellington, and Jakarta all experienced declines.
Concerns about China’s economy continue to dampen investor sentiment, despite some signs of improvement such as a return to inflation and a smaller-than-expected decline in exports and imports. There are calls for the Chinese government to unveil a substantial stimulus package akin to the one implemented during the 2008 global financial crisis to boost growth and support the property sector.
In the currency markets, the Japanese yen slightly weakened against the US dollar after receiving a boost from comments by the Bank of Japan’s head, hinting at a potential shift away from the current ultra-loose monetary policy.
During the eleventh month of the current fiscal year, the country’s foreign currency reserves have fallen below $19 billion for the first time. After paying off some import bills, the reserves have now stood at $18.26 billion on Sunday.
According to the International Monetary Fund (IMF), as of May 8, the total foreign currency reserves of the country were $19.82 billion.
Mohammad Mezbauul Haque, the spokesperson of Bangladesh Bank, informed that through the Asian Clearing Union (ACU), the central bank has paid off import bills totaling $1.63 billion over the past two months.
However, Bangladesh Bank maintains that after paying off the import bills, the foreign currency reserves now stand at $23.71 billion.
According to the Central Bank’s accounts, the reserves were $25.27 billion on May 8.
The Dhaka Stock Exchange (DSE) and the DSE Brokers Association (DBA) have expressed gratitude towards Prime Minister Sheikh Hasina for her directive to list government companies in the capital market, a move hailed as timely and positive.
The directive was issued during the recent meeting of the Executive Committee of the National Economic Council (Ecnec) last Thursday.
Dr. Hafiz Muhammad Hasan Babu, Chairman of DSE, described the directive as a significant step towards enhancing the dynamics of the capital market. He emphasized that besides invigorating the capital market, this move would also attract foreign investment and promote sustainable development.
Despite previous efforts, government institutions had not been listed in the stock exchange, according to a notification issued by the DSE. The Prime Minister’s directive is seen as a pivotal step towards revitalizing and expanding the economy.
Dr. Babu further remarked, “The listing of reputable companies in the capital market, as directed by the Prime Minister, will greatly benefit the country’s economy. It will also enhance investor confidence.”
Similarly, the DBA released a notification applauding the Prime Minister’s directive, terming it as positive and timely for the capital market.
Saiful Islam, President of DBA, expressed optimism about the directive’s potential to accelerate the country’s capital market and overall economy. He pledged support to relevant government departments and regulatory bodies in implementing the directive, ensuring its positive impact on the economy, including the capital market.
India has expressed interest in financing Bangladesh’s Teesta project, announced Foreign Minister Hasan Mahmud. Speaking to reporters after a meeting with Indian Foreign Secretary Vinay Mohan Kwatra, Mahmud stressed the importance of aligning the project with Bangladesh’s needs. He confirmed discussions on the Teesta issue during the meeting. Mahmud also affirmed Prime Minister Sheikh Hasina’s upcoming visit to New Delhi, indicating that the finalization of the date would depend on the formation of the new Indian government following ongoing elections.
Meanwhile, the IMF has approved a $1.15 billion staff-level loan for Bangladesh in its third tranche. Mahmud noted the ongoing elections in India and the subsequent formation of the new government as factors influencing the scheduling of PM Hasina’s visit.
When asked about the sequence of visits to India and China, Mahmud suggested Delhi’s geographical proximity to Bangladesh. Diplomatic sources suggest PM Hasina’s visit to India is planned for early July, following India’s elections.
Pre-election surveys indicate strong prospects for Indian Prime Minister Narendra Modi’s re-election. Modi previously congratulated PM Hasina on her electoral victory in January, expressing optimism about strengthening ties between the two nations.
The last bilateral engagement between the prime ministers occurred during the G-20 Leaders Summit in September 2023. Modi is expected to invite South Asian and BIMSTEC leaders to his swearing-in ceremony, fostering regional cooperation.
Addressing border killings, Mahmud emphasized the government’s commitment to ending such incidents and promoting the use of non-lethal weapons by border forces. Discussions also covered enhancing physical and people-to-people connectivity, including cooperation with India to import hydropower from Nepal and Bhutan through India. Mahmud highlighted the need to further ease visa restrictions to strengthen people-to-people relations.
