Asian and Australian financial markets ended the week with investors broadly more confident about equities, although the rally was accompanied by renewed concerns over currencies, energy prices and the outlook for monetary policy.
The standout performer of regional indices was Australia’s ASX 200, which rose about 3.5 percent over the five trading sessions. The index finished Friday at 9,263.6 points, slipping 0.09 per cent on the day after reaching a succession of record highs earlier in the week. The broader All Ordinaries also eased on Friday, but the overall weekly performance remained firmly positive.
The rally was broad-based initially. The benchmark index gained 1.4 percent on Tuesday, with investors responding positively to developments in global markets and a more favourable interest-rate outlook. On Wednesday and Thursday, the index pushed through previous records, finishing Thursday at 9,271 points. Mining stocks were particularly strong as gold and copper prices rose, while technology shares also benefited from improved global sentiment.
Stock movements
The Australian market’s performance was nevertheless uneven. Materials gained about 1 per cent on Friday and energy and technology each rose around 0.8 percent. By contrast, industrials fell 1.6 percent, healthcare declined 1.4 percent and financials lost 1 percent.
Banks were a particular drag at the end of the week, while healthcare stocks came under pressure after disappointing corporate results. ResMed fell more than 8 per cent following its earnings announcement. At the same time, gold miners benefited from renewed demand for the precious metal amid geopolitical uncertainty.
The Australian market was also being driven by expectations about the Reserve Bank of Australia. Investors increasingly expect the RBA to leave interest rates unchanged as inflation pressures moderate, although the possibility of another increase later in the year has not disappeared. The combination of high commodity prices, strong corporate earnings and expectations that the rate-hiking cycle may be nearing its end has provided an important tailwind for Australian shares.
Asian markets
Across Asia, the picture was less uniform. Hong Kong was among the strongest markets, with the Hang Seng Index rising 2.62 percent on Friday in a rally led by education stocks and other areas of the Chinese economy.
China’s markets remained more cautious. Investors continued to assess the strength of domestic demand, with expectations that Chinese bank lending would fall sharply in July after unusually strong lending in June. Reuters reported that economists expected new yuan lending of about 45 billion yuan for July, compared with 1.61 trillion yuan in June. The figures reinforced concerns that China’s economic recovery remains dependent on continued policy support.
Japan was dominated by developments in the yen. The Japanese currency has fallen to around four-decade lows, prompting an unusual joint intervention by Japan and the United States. The intervention temporarily eased pressure on the yen and raised fresh questions about whether the Bank of Japan could respond with higher interest rates. The currency moves were closely watched throughout Asian trading because of their implications for Japanese exporters, inflation and capital flows throughout the region.
South Korea and Taiwan remained important centres of investor attention because of their exposure to the semiconductor and artificial-intelligence industries. The broader Asian technology sector has been highly sensitive to movements in US technology stocks and changing expectations about the profitability of AI investment. Investors are increasingly distinguishing between companies with strong AI-related earnings and those whose valuations depend largely on future growth expectations.
Equities remain attractive
The week’s trading therefore highlighted an important characteristic of markets across the Asia-Pacific region: investors remain prepared to buy equities, but increasingly selectively. Australia’s record-setting share market has been supported by miners, commodities and expectations surrounding interest rates, while Hong Kong has benefited from renewed interest in Chinese equities. India continues to attract foreign capital, but Japan’s currency problems and China’s uneven economic recovery remain sources of uncertainty.
For Australian investors, the immediate outlook is likely to remain heavily influenced by commodity prices, the RBA’s next policy decisions, the Australian dollar and the continuing corporate earnings season. The ASX’s rise of roughly 3.5 percent during the week was impressive, but the sharp differences between sectors suggest that investors are becoming increasingly selective rather than simply buying the entire market.
With geopolitical tensions still affecting oil and gold, and major central banks approaching important decisions on interest rates, the coming weeks are likely to test whether the strong equity rally can be sustained.
