1. South-East Asia stocks-tepid; China downgrade weighs on sentiment

South-East Asia stocks-tepid; China downgrade weighs on sentiment

Most South-east Asian stock markets were tepid on Wednesday after Moody's cut its sovereign credit rating on China while investors awaited the minutes of the Federal Reserve's last meeting for cues on its rate hike stance.

By: | Published: May 24, 2017 4:18 PM

Most South-east Asian stock markets were tepid on Wednesday after Moody’s cut its sovereign credit rating on China while investors awaited the minutes of the Federal Reserve’s last meeting for cues on its rate hike stance. Moody’s Investors Services downgraded China’s long-term local and foreign currency issuer ratings, citing expectations that the financial strength of the world’s second-biggest economy would erode over the coming years.

“China plays a key role in Asia and regional markets are reacting negatively to Moody’s rating downgrade of China,” said Lexter Azurin, AVP – senior analyst at AB Capital. MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.3 percent, despite modest gains on Wall Street overnight.

“Regional markets are also awaiting the FOMC (Federal Open Market Committee) minutes, which will give some signal and confirmation with regards to the movement of the Fed in the next few months.” The minutes of the Fed’s latest policy meeting is scheduled to be released at 1800 GMT later on Wednesday.

Indonesia shares fell as much as 1 percent, heading for a third straight session of decline, dragged down by financials and consumer staples.

China’s downgrade has hurt overall sentiment, said Elvira Tjandrawinata, head of Indonesia equity research at Nomura Securities, adding that: “It’s also some profit-taking.” Bank Rakyat Indonesia (Persero) Tbk PT fell as much as 2.6 percent, while Unilever Indonesia Tbk PT dropped up to 2.9 percent.

Philippine shares opened slightly lower before reversing course on the back of gains in real estate and consumer staple stocks. Thai shares were little changed ahead of the central bank’s policy meeting scheduled later in the day.

The Bank of Thailand will likely keep its already-low benchmark rate where it has been for more than two years as the economy is slowly recovering and inflation is tame. Malaysia shares rose as much as 0.3 percent, boosted by energy and consumer stocks.

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