Equity markets in Asia performed strongly during November, driven by hopes that Covid-19 vaccines will soon be widely available. Investors were also buoyed by the news that Joe Biden had won the US Presidential election.
- Japan emerged from recession
- The slowdown in exports continued to moderate
- Australia cut interest rates to 0.1%
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Equity markets in Asia performed strongly during November, driven by hopes that Covid-19 vaccines will soon be widely available. Investors were also buoyed by the news that Joe Biden had won the US Presidential election.
“The Nikkei 225 Index reached its highest level in nearly 30 years”
Over November, the Nikkei 225 Index reached its highest level in nearly 30 years and rose by 15% over the month. Meanwhile, the Topix Index climbed by 11.1%, and the TSE Second Section Index - which focuses on medium-sized Japanese companies that have less exposure to export activity – increased by a more muted 6.8%.
Having shrunk by 8.2% in the second quarter and by 0.6% in the first quarter, Japan’s economy emerged from recession in the third quarter to expand by 5%. Growth was boosted by an increase in domestic demand alongside improving export activity. During October, the slowdown in Japanese exports continued to ease: shipments fell at an annualised rate of only 0.2% during the month, compared with September’s decline of 4.9%. The slowdown in imports also moderated: imports fell at an annualised rate of 13.3% in October, having dropped by 17.4% in September.
The Reserve Bank of Australia (RBA) cut its key interest rate to 0.1% and announced that it would purchase $100 billion-worth of medium-dated government bonds to reduce borrowing costs. Although Australian interest rates now stand close to zero, RBA Governor Philip Lowe maintained that negative rates are “extraordinarily unlikely”, commenting: “monetary policy is now about more than just short-term interest rates … if we need to do more, we can and we will”. The RBA raised its forecast for economic growth in the year to June 2021 from 4% to 6% but warned that high unemployment poses the principal risk to the economy. The country’s rate of unemployment stood at 7% in October.
Later in the month, the RBA’s Deputy Governor Guy Debelle urged Australia’s government to avoid removing stimulus measures too quickly, warning: “A number of European countries learned this lesson to their cost after the global financial crisis”. The ASX All Ordinaries Index rose by 9.9% over November.
During November, the leaders of 15 Asian nations – including Japan, China, South Korea, Australia, New Zealand, and the ten ASEAN countries – signed the Regional Comprehensive Economic Partnership (RCEP), a trade deal that will account for around 30% of the world population and about 30% of global GDP.
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