Little Faith in Asia Stocks as Traders Eye This Week's Events

(Bloomberg) -- An eight-week high and the best month in a year -- that’s what Asian stocks have achieved so far in January. But the market action on Monday shows investors remain cautious.

The MSCI Asia Pacific Index was little changed at 5:54 p.m. in Hong Kong Monday, erasing a slight morning advance as traders held off on big bets. That’s because all eyes are on the U.S.-China trade talks starting Wednesday. There’s also the release of earnings from tech giants including Apple Inc. and Facebook Inc., which could set the tone in Asia. A scheduled Federal Reserve meeting will also be scrutinized for any words about plans for monetary-policy adjustments.

“The outlook is quite complicated for investors,” said Margaret Yang, a strategist at CMC Markets Singapore Pte. “This week is heavily dominated by earnings as well as political and economic events. It’s so heavy that there’s probably no single direction for investors to position their portfolio.”

She pointed out that as equities have rallied, so has gold, indicating that investors remain cautious and are using the precious metal to hedge geopolitical uncertainties.

That caution may be warranted. The MSCI Asia Pacific Index has gained 5.4 percent this month, almost as much as its jump at the start of last year. The benchmark proceeded to give back all of its gains and more to end 2018 with its worst annual loss since 2011.

Little Faith in Asia Stocks as Traders Eye This Week's Events

“Global equities have made a sturdy recovery recently,” Tai Hui, chief market strategist for Asia Pacific at JPMorgan Asset Management, wrote in a note to clients. “This week will prove to be a key test of whether this momentum can be sustained. A more dovish Fed and steady progress in trade negotiations will be crucial in sustaining positive market sentiment.”

The Fed may communicate more dovish signals to be more aligned with market expectations of limited room for rate increases this year, Hui said. Meanwhile, China’s Vice Premier Liu He will meet U.S. Trade Representative Robert Lighthizer in Washington for two days of talks, building on mid-level discussions earlier this month.

In between, there will also be earnings to consider. Caterpillar Inc., a key economic bellwether, and Alibaba Group Holding Ltd. are among key results coming in the U.S. this week. Earnings are also starting to ramp up in Japan, with highlights including Nintendo Co., Nomura Holdings Inc. and Honda Motor Co. among dozens set to report by Friday.

Stock-Market Summary

  • MSCI Asia Pacific Index little changed
  • Japan’s Topix index down 0.7%; Nikkei 225 down 0.6%
  • Hong Kong’s Hang Seng Index little changed; Hang Seng China Enterprises little changed; Shanghai Composite down 0.2%; CSI 300 little changed
  • Taiwan’s Taiex index up 0.4%
  • South Korea’s Kospi index little changed; Kospi 200 little changed
  • New Zealand’s S&P/NZX 50 little changed (Australia is closed for a holiday)
  • India’s S&P BSE Sensex Index down 0.9%; NSE Nifty 50 down 1%
  • Singapore’s Straits Times Index little changed; Malaysia’s KLCI down 0.2%; Philippine Stock Exchange Index little changed; Jakarta Composite down 0.4%; Thailand’s SET little changed; Vietnam’s VN Index up 0.4%
  • S&P 500 e-mini futures down 0.4% after index closed up 0.8% in last session

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