February 2024 Outlook: 🇺🇸 United States-Neutral｜🇪🇺 Europe-Neutral｜🇯🇵 Japan-Slightly Positive｜🇨🇳 China-Slightly Negative｜Asia-Neutral

US inflation data exceeded expectations, reducing the likelihood of an interest rate cut in March, and high interest rates are expected to persist until mid-year. The Japanese stock market is receiving positive attention, but both the Chinese and Hong Kong markets are still struggling with a downward trend.

🇺🇸 United States-Neutral
🎈 Interest Rate Expectations to Remain Until Summer; Stocks Face High Volatility In Earnings Season
US Producer Price Index (PPI) and Consumer Price Index (CPI) for January exceeded market expectations. The Federal Reserve may need to exercise patience and wait for inflation data to further moderate before considering rate cuts, but it is widely believed that inflation is gradually moving towards the 2% target, with potential rate cuts expected to occur after May. In terms of the stock market, this year’s gains in the US market have been primarily driven by the technology and communication services sectors. With the recent earnings season in the US, increased market volatility is expected, and investors need to be particularly vigilant.

🇪🇺 Europe-Neutral
💰 European Inflation Remains High; UK Wage Growth Slows Down
ECB’s Lagarde has stated that the eurozone has not experienced a severe economic recession and that the most significant inflation pressures have subsided. While it is currently uncertain when interest rates will be lowered, authorities will begin implementing rate cuts if there is evidence that inflation is gradually returning to the 2% target. On the other hand, the latest wage data released by the UK’s Office for National Statistics shows a slowdown in wage growth for local workers in the three months leading up to November 2023. This suggests that there will be no immediate changes to European interest rate policies.

🇯🇵 Japan-Slightly Positive
💹 Nikkei Index Rose 9% in January; Series of Measures Attract Investors
The Nikkei Stock Average has shown a strong upward momentum this year, with a January increase of 8.4%, surpassing 36,000 points and reaching a new high in nearly 34 years. The Bank of Japan has announced its interest rate decision, in line with market expectations, maintaining the key benchmark rate at -0.1%. The Bank of Japan stated that the economy is gradually moving towards the expected level, with core inflation expected to be around 1.9%, very close to the 2% target. Additionally, the Japanese stock market has recently implemented a series of measures to enhance its appeal to individual and foreign investors, including increasing tax-free investment quotas and eliminating dividend and capital gains taxes. These measures are expected to contribute to the development of the Japanese stock market.

🇨🇳 China-Slightly Negative
📉 Mainland Continues to Face Deflationary Challenges; Hong Kong PMI Contracts Again
Mainland China’s economy is still struggling with deflationary pressures, as the Consumer Price Index (CPI) for December recorded a year-on-year decline of 0.3%, marking three consecutive months of negative growth. This indicates that the economy is still in deflationary territory, as reported by S&P Global. Additionally, Hong Kong’s Purchasing Managers’ Index (PMI) for January came in at 49.9, slightly lower than December’s 51.3, and ended two consecutive months of being above the 50-point threshold, indicating a slight downturn in the business environment as Hong Kong enters 2024. It is believed that both the mainland China and Hong Kong markets will require some time to recover.

🌏 Asia-Neutral
💥 Weak Chinese Economy Impacts Asian Markets; Asia Benefits from the AI Boom
The AI boom has driven the export of electronic components in Asian regions such as South Korea and Taiwan. The US State Department has stated that 15 American semiconductor companies are seeking to invest $8 billion in Vietnam. Countries in Southeast Asia, including India and Thailand, have also introduced new industrial policies and actively sought investment from semiconductor giants. However, the overall performance of the Asian market is affected by the continued weakness of the Chinese economy.

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