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MACRO FORCES AND ASIAN STOCKS

There's a lot going on in the world of macroeconomics at the moment, you may have noticed, and HSBC's head of APAC equity strategy Herald van der Linde takes a look at some correlations between Asian stock markets and global trends in his Friday "Flying Dutchman" note.

He has a few caveats, correlation isn't causation, and there are plenty of domestic factors going on too that shouldn't be ignored. But it's still interesting.

Firstly van der Linde and team find that Asian markets react negatively during dollar rallies with China and Hong Kong hurt the most, and Thailand and India the least.

That's a bit interesting as you'd think a stronger dollar would be good for big exporters, but of course if that stronger dollar is a result of inflation or recession fears, then it isn't good.

U.S. yields have an interestingly mixed effect -- again it's partly to do with what they say about growth -- but really it depends on the industry composition of different markets.

Bank-heavy Singapore and Indonesian indexes do well when yields rise, tech-heavy Korea and Taiwan, the opposite.

As for oil prices, Korea is the most sensitive, because of its big oil processing sector. Perhaps surprisingly, oil prices have a more mixed effect on exporter Malaysia, however, HSBC says that because oil is so important, moves in oil prices move the currency with all sorts of knock-on effects.

Lastly they track the relationship with Chinese industrial production.

Not surprisingly Chinese markets react strongly to this, but more interestingly there has been a shift elsewhere. Pre-pandemic, almost all markets in the region benefitted from stronger mainland Chinese manufacturing, now ASEAN markets benefit from weaker manufacturing in mainland China.

They don't really get into why other than pointing to "shifting supply chains"

(Alun John)

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