Stock information is displayed on a screen at the Taiwan Stock Exchange headquarters in Taipei, Taiwan, Monday, Jan. 15, 2024.
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Optimism about artificial intelligence drove Taiwan’s stock market higher on the first day of 2024, making it the best-performing market in Asia Pacific so far this year.
this Taiwan Weighted Index The company’s shares have soared 28% so far this year, driven by stocks in the artificial intelligence value chain.
Heavyweight British Semiconductor Shares rose 63% in the first half, while rival Foxconn – trading Hon Hai Precision Industry — up 105% over the same period.
“Global market performance this year has been largely driven by artificial intelligence and central bank policy themes, and this is likely to continue,” said Rahul Ghosh, global equity portfolio specialist at asset manager T. Rowe Price. The firm’s investment prospects.
The potential and scale of the AI investment cycle continues to drive global economic activity, he said, adding that the impact of AI investments is expanding into sectors such as industry, materials and utilities.
Japan Benchmark Index Nikkei 225 Index second in the region after surpassing all-time highs multiple times earlier this year. In the first six months of this year, the Nikkei gained about 18%.
The Nikkei Index set a new 34-year record in February, surpassing the all-time high of 38,915.87 points set on December 29, 1989.
Since then, the index has soared to the psychological mark of 40,000 points, eventually hitting a record closing high of 40,888.43 points on March 22.
According to analysts interviewed by CNBC, while Taiwan may lead the Asian market, Japan appears to be the most favored market in the future.
Ghosh said improved corporate governance standards continue to have a real and considerable impact on corporate performance in the world’s fourth-largest economy.
In addition, Ben Powell, chief Asia-Pacific investment strategist at BlackRock Investment Institute, noted in a report on June 14 that the Bank of Japan is increasingly confident that it can achieve its inflation target. , thus “normalizing monetary policy in a gradual and progressive manner.”
Powell said Japan’s macroeconomic backdrop is favorable for risk assets. “We remain overweight Japanese equities, driven by valuation support from strong corporate reform momentum, healthy earnings and still-negative real rates.”
While most Asian markets are in positive territory so far this year, three – Thailand, Indonesia and the Philippines – have fallen into the red.
Thailand’s SET index plunged 8% in the first six months, becoming the region’s worst-performing index. The Jakarta Composite Index fell 2.88%, while the Philippine Stock Exchange Index fell about 0.6% during the same period.
All eyes are on the Fed
Most Asian central banks are keeping a close eye on the Fed’s next move as they usually base their monetary policy decisions on the Fed’s expected actions.
The Federal Reserve will signal before the end of 2023 that it may cut interest rates multiple times this year.
The dot plot is a visual representation of each FOMC member’s interest rate forecast for bank short-term interest rates at a specific point in the future.
However, the central bank has planned more aggressive monetary tightening in 2025, raising its forecast to four rate cuts of 25 basis points each.
Expectations for rate cuts have been repeatedly postponed as inflation remains higher than expected. Higher employment and wage growth in the United States also reinforce the argument that the Federal Reserve does not need to cut interest rates.
The question now is: when will the first rate cut happen?
this CME FedWatch Tool It shows that 61% of traders expect the Fed to cut interest rates by 25 basis points at its September meeting.
But on June 16, Minneapolis Federal Reserve Bank President Neel Kashkari said it was a “reasonable prediction” for the Fed to cut interest rates once this year, but not until December.
Ken Orchard, head of international fixed income at asset manager T. Rowe Price, agrees with Kashkari.
“After the November election, we still expect the Fed to cut interest rates by 25 basis points at the December policy meeting, and possibly another rate cut in the summer.”
However, he predicted the central bank would cut interest rates less than indicated by the dot plot in 2025, saying the outlook for 2025 was “much murkier” than this year.
“One or two rate cuts next year seems more realistic,” Orchard said, warning that the Fed might even raise borrowing costs next year.
“The Fed’s insurance rate cuts could worsen inflation and increase the likelihood of a rate hike in 2025.”
Homin Lee, senior macro strategist at Swiss private bank Lombard Odier, looked more optimistic, telling CNBC that his base case is two rate cuts in the second half of 2024.
This is one less than the three rate cuts predicted by the Fed in its outlook report on May 9 (before the Fed revised the dot plot).
“Having said that, given the Fed’s ‘asymmetric’ stance that the barriers to tightening again are very high and the barriers to starting to cut rates are much lower, we remain confident that we can start cutting rates in September,” Lee added.
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