Looking ahead to Wednesday’s activities in Asian markets, a significant array of economic data and an interest rate verdict in Indonesia will command attention. This will coincide with investors’ assessment of Chinese stock movements and anticipation of Nvidia’s fourth-quarter earnings announcement.
Concerns regarding the U.S. chip giant’s performance dampened market sentiment on Tuesday, leading to a decline in its shares and contributing to losses in broader U.S. indexes. Nvidia witnessed a notable 4.4% drop in its share value, the largest since October, consequently impacting the Nasdaq, which fell by 1%. The repercussions of Nvidia’s results are expected to reverberate in Asian markets, especially in regions like Hong Kong, China, and Taiwan, which collectively accounted for a significant portion of Nvidia’s revenue in the previous quarter.
Of particular interest to investors will be Nvidia’s assessment of the impact of U.S. restrictions on chip sales to China on its business operations and future outlook. Despite efforts to introduce new products tailored for the Chinese market, there remains a risk of further bans akin to its initial China-focused chips. Additionally, Nvidia faces challenges related to supply shortages from its chip contractor TSMC, based in Taiwan, the world’s largest contract chipmaker.
Hong Kong’s Hang Seng index has struggled this year, experiencing a 4.7% decline year-to-date, with its tech sector faring even worse, down by 13%. However, the recent modest recovery in Chinese stocks, as evidenced by the relatively stable performance of the CSI 300 index, may provide some support to regional markets. Both the Shanghai Composite and CSI300 indices are aiming for their sixth and seventh consecutive days of gains, respectively, marking their longest winning streaks since January of the previous year. The recent interest rate cut implemented by China could further bolster this upward trajectory.
Meanwhile, Indonesia’s central bank is widely anticipated to maintain its key seven-day repo rate at 6.00% on Wednesday, as per a Reuters poll of 30 economists. However, opinions diverge regarding the trajectory for the rest of the year, with the median forecast suggesting rate cuts beginning in the second quarter and continuing quarterly, ultimately reaching 5.25% by December. Indonesia’s inflation rate has remained within the central bank’s target range since July, indicating the effectiveness of cumulative rate hikes of 250 basis points. The performance of the rupiah against the dollar, down 1.7% year-to-date but outperforming several regional peers, also warrants attention.
In addition to Indonesia’s interest rate decision, Wednesday will see the release of Japan’s trade data and tankan surveys, South Korea’s producer price inflation figures, and Australia’s hourly wage growth data for the fourth quarter of the previous year. These developments will likely provide further insights into market trends and direction on Wednesday.