Last week, most Asia-Pacific stock markets closed lower, with Japanese stocks experiencing the most severe decline, and Southeast Asian stock markets all fell.

As of last Friday's closing, the Japanese stock market fell by more than 1,000 points during the week, a decline of 2.74%, marking two consecutive weeks of decline. The South Korean stock market also fell for two weeks in a row, continuing to stay below the 2,600-point level, with a slight weekly decline of 0.41%, closing at 2,583.3 points. Australia's S&P/ASX200 index fell by 0.87% or 71.9 points for the week, closing at 8,211.3 points.

Most Southeast Asian stock markets fell. As of last Friday, Indonesia's Jakarta Composite Index (JKSE) fell by 0.84% or 65.4 points for the week, closing at 7,694.66 points; Malaysia's Kuala Lumpur Composite Index fell slightly by 1.68% last week, closing at 1,618.3 points; Singapore's Straits Times Index fell by 1.29% or 46.78 points for the week, closing at 3,593.41 points; the Philippine Manila Index reported 7,314.23 points, falling by 1.37% or 101.5 points during the week; Thailand's SET Index fell by 1.77% for the week, closing at 1,463.42 points; Vietnam's Ho Chi Minh Index fell by 2.55% for the week, closing at 1,252.72 points.

Advertisement

Xavier Li, a professor of management practice at EMLYON Business School, analyzed to 21st Century Economic Report reporters that the turmoil in Southeast Asian stock markets is essentially due to the capital pressure brought by the global interest rate environment and the strengthening of the US dollar. The Fed's interest rate cuts did not meet expectations, leading to an increased attractiveness of US dollar assets. Coupled with the relatively robust performance of the US economy, this has created a capital siphon effect on emerging markets, which undoubtedly weakened the liquidity and stability of Southeast Asian markets. "The challenge for Southeast Asian countries is that if capital continues to flow out and their currencies depreciate, it will affect local financial stability and investment confidence, reflecting the vulnerability of Southeast Asia's dependence on foreign capital."

Bo Wenxi, Chief Economist of China Enterprise Capital Alliance China, told 21st Century Economic Report reporters that the decline in most Southeast Asian stock markets may also be related to multiple factors, such as concerns about the escalation of global trade tensions, worries about slowing economic growth, and investors' reassessment of the prospects of the Asian chip industry.

Southeast Asian stock markets continue to fluctuate

Over the past week, Southeast Asian stock markets basically closed with a downward trend.

Jin Muren, a researcher at Anbound Think Tank, told 21st Century Economic Report reporters that last week's Asia-Pacific stock markets showed a divergent and volatile trend because recently, as geopolitical situations continue to evolve, funds tend to be more risk-averse, leading to fluctuations in the stock markets of some emerging market countries and regions. In addition, some Southeast Asian stock markets have accumulated a certain increase in the early stage, and some funds have taken profits due to considerations of future uncertainties.

Looking at the situation of Southeast Asian stock markets, Vietnam's Ho Chi Minh Index experienced the most severe decline, with a drop of more than 2%. The second-largest decline was in the Thai stock market.

The previous week, the Thai stock market had surged significantly due to the country's central bank's unexpected interest rate cut. Last week, there was also good news for the Thai stock market, with Thailand releasing a new economic growth forecast. Pornchai Thiraveja, Director of the Fiscal Policy Office of Thailand's Ministry of Finance, said that the country's Ministry of Finance expects Thailand's economy to grow by 2.8% this year, higher than the 2.7% forecasted in July; it is expected that the economy will grow by 3% in 2025. The World Bank also affirmed Thailand's economic growth. The World Bank and IMF forecast that Thailand's economic growth rate will be 2.8% in 2024 and 3.0% in 2025.Bai Wenxi stated that the Thai Ministry of Finance's economic forecast is higher than expected, indicating that the Thai economy may be recovering and growing. The rebound in tourist numbers and the stability of the political situation could have a positive impact on the economy, which may enhance investors' confidence in the Thai stock market.

At the same time, Li Huihui believes that caution should be exercised when considering the Thai Ministry of Finance's upward revision of economic forecasts. "On the surface, the Thai Ministry of Finance's upward revision of economic estimates is beneficial to the stock market, but the actual effect should be treated with caution. Although the recovery of the tourism industry and the revival of consumption are indeed beneficial to the Thai economy, the impact of external interest rate pressures on the Thai baht cannot be ignored, posing a risk to capital flows in the medium and short term," Li Huihui said. If Thailand can rely more on domestic consumption and the upgrading of its own industries for economic growth, reducing dependence on external demand, it will help to reduce the impact of external fluctuations on its stock market.

In addition, the Indonesian stock market is also attracting market attention. However, last week, 375 stocks on the Indonesia Stock Exchange in Jakarta fell, exceeding the number of stocks that closed higher - 222, while 232 stocks remained unchanged, essentially flat. Although the Indonesian stock market closed lower last week, there was also positive news. Last week, the Indonesian Ministry of Foreign Affairs stated that Indonesia has expressed its willingness to join the BRICS cooperation mechanism and has initiated the relevant procedures to join.

"The Indonesian stock market is highly regarded not only for its robust economic growth but also for its strategic position as a resource exporter in the global energy transition," Li Huihui analyzed to reporters. Joining the BRICS mechanism may provide new funds and markets, but its economy still faces high sensitivity to global commodity price fluctuations. He maintains a cautiously optimistic attitude towards the Indonesian stock market. For the Indonesian stock market to gain sustained upward momentum, it needs to further promote the diversification of supply chains to reduce dependence on single export commodities, thereby enhancing its risk resistance.

Singapore's recent economic recovery is also evident.

The Ministry of Trade and Industry of Singapore recently released economic survey data showing that Singapore's economic growth accelerated significantly in the third quarter of this year, with a preliminary estimate of a 4.1% year-on-year increase in Gross Domestic Product (GDP), higher than the 2.9% increase in the second quarter. After seasonal adjustment, the GDP increased by 2.1% quarter-on-quarter in the third quarter, higher than the 0.4% increase in the second quarter. With a positive economic outlook and the Singaporean government having taken a series of measures to support business listings and stock market development, the prospects for the Singaporean stock market are看好. Yang Huishi, Assistant Manager of Research and Portfolio Management at FSMOne Singapore, believes that the dividend yield of Singaporean stocks is higher than that of other stock markets, attracting investors who focus on fixed income, especially when interest rates may be lowered.

The decline in the Japanese and Korean stock markets continues, with Japanese stocks still favored by foreign capital.

Last week, both Japanese and Korean stocks fell for two consecutive weeks.

In response, Li Huihui analyzed that the main challenges facing the Japanese and Korean stock markets are the division of the global supply chain and competitive pressure in the semiconductor industry. Especially for South Korea, if its policy reforms can effectively narrow the "Korean discount" and attract foreign capital, the stock market may have room for upward movement in the medium and long term. For Japan, if the yen continues to depreciate, it may strengthen the economy's dependence on exports, but at the same time, it will also increase import costs and inflationary pressures. "Overall, I believe that Japan and Korea need to rely more on domestic demand-driven growth and enhance their high-tech and independent innovation capabilities to cope with the uncertainties brought about by changes in the global supply chain."

Some interviewed experts believe that the weakness of the South Korean stock market is related to its slow economic growth. Jin Muren told reporters from the 21st Century Economic Report that under the influence of a gloomy global economy and increasing geopolitical uncertainties, greater economic and export pressures may impose certain constraints on the South Korean stock market. Especially in the context of South Korea's third-quarter GDP growth being far lower than economists' forecasts, and its third-quarter exports experiencing the first quarterly negative growth since the fourth quarter of 2022.As for the Japanese stock market, Li Huihui stated that the recent significant fluctuations in the Japanese stock market are actually a reaction to the rise in US Treasury yields and the warming of global risk sentiment. Although the depreciation of the yen is beneficial for Japanese exports, the push on import costs and inflation may weaken consumer vitality.

Nevertheless, the Japanese stock market has still been favored by foreign capital recently. Data shows that in the week of October 18th, foreign capital net purchased 580.4 billion yen worth of Japanese equity securities, and the previous week saw a net purchase of 972.6 billion yen worth of Japanese equity securities. The Bank of Japan stated in its latest "Financial System Report" that the activity level of the Japanese stock market has been higher than the historical trend level this year, but stock valuations have not shown obvious overheating. The central bank stated that the price-to-earnings ratio has remained at the historical average level. The Bank of Japan added: "Considering the market risk associated with Japanese banks holding stocks to a certain extent, the development of asset prices is worth paying attention to."

However, Li Huihui believes that there are still risks in the subsequent development of the Japanese stock market. He stated that the Japanese stock market may rely on policy and exchange rate support in the short term, but in the long term, tightening external economic conditions, the "water extraction" effect of Japanese interest rate hikes on liquidity, and limited policy space may pose the risk of a downward trend in the Japanese stock market.

Kim Mu-ren also stated that investors are paying attention to whether the Liberal Democratic Party of Japan and its long-term partner, the Komeito Party, can secure a majority of seats in the election. If the two parties fail to achieve their wishes, it may lead to political instability and further increase the pressure to expand the budget. In addition, whether the Japanese economy can further emerge from deflation and whether the yen exchange rate can effectively reverse also become factors affecting the subsequent stock market trends.