Asian bourses opened mixed to a weak majority in trading Monday (22/3/2021), as investors watched the movement of the Turkish lira following the sudden turmoil at the country’s central bank and awaited a decision from China’s central bank regarding its latest loan interest rate policy.
Only the Shanghai Composite China index and South Korea’s KOSPI opened in the green zone today, where the Shanghai index opened up 0.16% and the KOSPI opened up 0.15%
While the rest opened in the red today, the Japanese Nikkei index was recorded as opening. slumped 1.07%, Hong Kong’s Hang Seng opened down 0.65%, and Singapore’s Straits Times Index (STI) edged down 0.06%.
Asian market participants are watching the Turkish lira today, where it fell sharply to 8,145 against the greenback (US dollar), compared to levels below 7.5 per dollar seen last week.
It came after Turkey’s central bank was in turmoil, with Turkish President Recep Tayyip Erdogan abruptly changing his leader just days after a sharp interest rate hike.
Investors Wait for PBoC Decisions
In addition, investors are also waiting for the decision by the People’s Bank of China (PBoC) to decide on its benchmark lending rate policy for the March 2021 period at 09:30 local time.
Observers and analysts in a Reuters poll expect both rates to remain unchanged, with the 1-year benchmark lending rate remaining at 3.85% and the benchmark 5-year lending rate remaining at 4.65%.
Turning to the United States (US), the New York (Wall Street) stock exchange closed in a variety of ways, tending to be depressed in trading last weekend (19/3/2021), after the US central bank, namely the Federal Reserve (The Fed), said it did not extend the relaxation of capital for banks affected by the Covid-19 pandemic.
The Dow Jones Industrial Average (DJIA) slumped 0.71% to 32,627.97 and the S&P 500 edged down 0.06% to 3,913.1. However, the Nasdaq Composite, which contains technology shares, shot 0.76% to 13,215.24.
Other Sentiments Driving the Stock Exchange
The Fed, Friday (19/3/2021), did not extend the regulation that will end this month, which loosens the supplementary leverage ratio (SLR) of banks.
This rule allows banks to have a lower level of capital than government bonds held.
The decision could have some bad effects, traders have warned, if banks in response sell part of their holdings of US government bonds (Treasury). That could send higher yields at a time when the rapid rate hikes already scare investors.
“This is disappointing to investors because the Fed decided not to renew it,” said Jimmy Chang, chief investment officer at Rockefeller Global Family Office.
“There was a lot of expectation, at least a few weeks ago, that the Fed will extend the SLR waiver for the big banks given the need to absorb so many Treasury issues.”
Meanwhile, bond yields bounced from lows after the announcement. The 10-year Treasury yield turned higher before turning flat at 1.73%, hovering near 14-month highs. The benchmark interest rate starting in 2021 is below 1%. (1 basis point equals 0.01%).
“The pace of going up to this level is too fast for comfort, when yields move higher, it’s more difficult to justify an increased valuation,” Chang said.
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