Asia Day Ahead: Risk-on prevails, Singapore Blue Chip index back at Nov 2021 high

Asia Open

The Asian session looks set for a positive open, with Nikkei up 0.71%, the ASX up 0.80% and the KOSPI up 0.68% at the time of writing. It has been a choppy session in Wall Street overnight, but we eventually saw risk-on sentiments prevail, with major US indices closing in the green and the VIX drifting lower. With NVIDIA’s earnings now behind us, we may expect broader risk sentiments to flow with the prevailing bullish trend into year-end and along with positive seasonality, that could mean some resilience for Asian indices ahead as well.

Overnight, market participants had reassessed initial jitters over NVIDIA’s sales forecast and seemingly took comfort with the broader picture that still highlights robust demand for AI-related products and solutions. However, the relatively lower valuation in small caps and value sector may have captured market attention, which seemingly offer more room for investors to reap better returns ahead. The DJIA and Russell 2000 were both up more than 1%.

The US dollar made another march to the upside, with some safe-haven flows likely contributed from Ukraine-Russia geopolitical developments. Gold prices seem to be eyeing for its fifth straight day of gains, while the JPY found its footing as well. We may expect tensions to persist as both sides vie to gain some political leverage ahead of any upcoming negotiations under a Trump Administration. This will remain a key risk to watch, with any direct confrontation of Russia with the West likely to mark a notch higher in geopolitical stakes.

Japan’s consumer price index (CPI) supports case for further policy normalisation

The economic calendar today saw Japan’s inflation edging slightly past expectations, with core inflation coming in at 2.3% year-on-year (consensus 2.2%) and offering some validation for the sustainable wage-price cycle that policymakers want to see. Currently, markets are pricing a 57% chance for a rate hike in December by the Bank of Japan (BoJ), with the case for further normalisation reinforced by the sharp weakening in the JPY since September this year.

Singapore Blue Chip eyeing for multi-year high

Aside, the Singapore Blue Chip index has been on a stellar run, rising close to 33% since August this year to retest its November 2021 high. Any move above this level could be significant, as the index attempts to break away from its long multi-year consolidation pattern. One to watch for a break above the 376.33 level, which may bode well for further upside towards the 386.78 level next. For now, its weekly relative strength index (RSI) points to overbought levels, which may call for some near-term cool-off, but the broader upward trend is likely to persist.

Singapore Blue Chip weekly chart