August 2018
The share prices of larger companies performed better than their medium-sized counterparts during August. Over the month as a whole, the Nikkei 225 Index rose by 1.4%, while the Topix Index and the TSE Second Section Index fell by 1% and 1.4% respectively. In Australia, Malcolm Turnbull was ousted as Prime Minister and replaced by Scott Morrison following a vote of no confidence.
- Japan’s economy grew more strongly than expected
- The RBA’s key interest rate has remained unchanged for two years
- The Bank of Korea expects inflation to move gradually towards its 2% target
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The share prices of larger companies performed better than their medium-sized counterparts during August. Over the month as a whole, the Nikkei 225 Index rose by 1.4%, while the Topix Index and the TSE Second Section Index fell by 1% and 1.4% respectively. Car manufacturer Toyota revealed unexpectedly strong quarterly net profit growth of 7.2%. However, the company also warned that it was likely to sell fewer cars in the current fiscal year than previously forecast against a backdrop of rising protectionism from the US.
“RBA Governor Philip Lowe warned the public to ensure their finances can “withstand a lift in interest rates””
Japan posted stronger-than-expected economic growth during the three months to June, expanding at an annualised rate of 1.9%. Growth was boosted by an increase in private consumption. Industrial production deteriorated between June and July, falling at a rate of 0.1% and posting its third consecutive monthly decline. Output was affected by a drop in the production of transport equipment, business machinery and iron and steel. On an annualised basis, industrial production rose by 2.3%. Core consumer prices rose by 0.8% year on year in July.
In Australia, Malcolm Turnbull was ousted as Prime Minister and replaced by Scott Morrison following a vote of no confidence. The Reserve Bank of Australia (RBA) maintained its key interest rate at 1.5% at its August meeting; the rate has now remained unchanged for two years. Nevertheless, in a speech delivered during the month, RBA Governor Philip Lowe warned the public to ensure their finances can “withstand a lift in interest rates”. RBA officials also highlighted the impact of global trade policy and warned that, although further proposed measures from the US were “expected to be small, the broader risk of adverse effects on investment decisions and confidence had increased”. Elsewhere, the central bank warned against the impact of heavy ongoing drought conditions in eastern Australia that could adversely affect farm production. The ASX All Ordinaries Index rose by 1% during August.
Policymakers at South Korea’s central bank elected to maintain its key interest rate at 1.5% during August. The Bank of Korea believes that downside risks to the domestic economy – including the trade conflict between the US and China, and a “sluggish” labour market – have intensified. Nevertheless, BoK officials still expect South Korea’s rate of consumer price inflation to move gradually towards its 2% target. The Kospi Index rose by 1.2% over the month.
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