Scoring Asia: A Region In Rebound?

  • Thursday, October 22, 2015

Asia Stock Photo

How’s Asia these days? For most of the region, central banks are signaling that we may be in the midst of a subtle market rebound–or at least a stabilization.

Due to its relative opacity, the central bank of the region’s largest economy–the People’s Bank of China (PBoC)–is not scorable by Prattle’s algorithm. The bank simply does not publish enough material to allow us to accurately evaluate its mood. Because of this, proxies are needed to get a fuller picture this essential piece of the Asian market. In this case, we often use the Reserve Bank of Australia (RBA) as an indirect measure of the Chinese private sector because of the deep trade connections between the two countries’ economies. The RBA’s mood suffered a few rounds of steep decline earlier in the year, but has recently leveled off–settling in mildly hawkish territory.
RBA, TAI, Equity Trends
The trends in the Bank of Taiwan’s (TAI) mood resemble the RBA’s: the pronounced volatility and declines of the TAI’s mood have calmed, and the bank is now signaling an economy on the rise. Taken together, the sentiment of the Taiwanese and Australian central banks indicate that the Chinese economy is actually lifting the region’s spirits.
This mood is still tempered, however, by the recent economic turbulence, and investors are approaching the Asian markets with caution.
RBA and TAI

While attitudes in most of the region have become generally more optimistic, Japan is exception to the rule. Slowing growth in the face of continued stimulus has caused the Bank of Japan’s (BOJ) sentiment to fall sharply since September, and the BOJ’s current dovish trend suggests that Japanese central bankers may once again move to further stimulate their economy.

Bottom line: overall, the Asian economy seems to be regaining its footing–Japan being the major exception. In fact, the attitude of the island nation’s central bank indicates that a stimulus may be in the cards in the near future.

 

The Prattle Team,
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