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Asia EM Express: Stocks lackluster as China's relations with Vietnam deteriorate and Thailand remains in limbo after coup

FXStreet (Łódź) - Asian stocks were subdued on Tuesday as the tensions in the China-Vietnam territorial dispute continued aggravating and political uncertainty in Thailand grew following last week's coup.

At the beginning of May China has sent an oil rig near the Paracel Islands, an area over which both countries claim right, and Vietnamese ships' attempts to prevent it from setting up led to multiple collisions between the vessels. The situation has been aggravating since then and yesterday it was reported that a Chinese fishing boat rammed a Vietnamese one, sinking it.

Meanwhile in Thailand the military junta's rule, led by General Prayuth Chan-ocha, was backed by King Bhumibol Adulyadej. The General promised that efforts would be made to build a “genuine democracy”, but didn't give any more details or an indication when elections could be held. Protests against the junta continued and a warning had been issued that the military would become “more strict” against the demonstrators if they carried on.

Economic data

Bank of Korea informed on Tuesday that the Consumer Sentiment Index decreased to 105 in May from 108 in April and below expectations of a drop to 107.

"We think the 3-pointfall from April is the first evidence of a macro impact from the Sewol disaster,” Tim Condon from ING suggests. “We do not think consumer spending would be resilient to a steady decline in consumer confidence.
However, we also consider such a decline unlikely. Our baseline scenario is that the dent to confidence from the ferry disaster will be transitory.”

Philippines trade deficit widened to $-146M in March from $-131M in February but above forecasts of $-173M. On an annual basis Imports jumped 9.6%, up from the 1.7% rise and beating expectations of a 9.1% increase.

Technicals

The Chinese yuan fell to a three-week low, following the PBOC's lowering of the rreference rate by 0.03% to 6.1699 per dollar on Monday.

The USD/CNY daily FXStreet Trend Index was slightly bullish and the OB/OS Index was neutral. RSI stood at 56 at the last close, and has risen to 68 so far today. Daily 2-StDev Volatility Bandwidth was shrinking at 111 pips, with ATR (14) shrinking at 74 pips. The 1D 200 SMA was at 6.1264, while the 1D 20 EMA was at 6.2349.

USD/CNY was trading 0.12% higher at 6.2466 at the moment of writing.

The pivot of 139.00 is still a stumbling block for EUR/JPY bulls

EUR/JPY failed to settle above 139.00 and dropped to 138.88 early in Europe.
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