Viewing the move as a cover for missile test, South Korea and the US responded to the threat by starting discussion over the deployment of a US Army missile in South Korea to improve the defense posture. China denounced the system’s deployment stating that it would harm its strategic security interests. Tensions worsened after recent images revealed that China had positioned missiles on a contested island in the South China Sea, just after President Xi pledged not to militarize the disputed atolls. In the meantime in California, President Obama was gathering with ASEAN leaders last week to discuss the need to ease tensions in the oil-rich South China Sea region.
Oil also sparked international debates after weeks of price collapsing. As a result, oil ministers of Saudi Arabia, Russia, Qatar and Venezuela announced a production freeze output at January levels. Crude oil was volatile last week with New York futures price rising to USD31.98 per barrel at the most before closing the week at USD29.64 per barrel on February 19th. In Hong Kong, oil companies CNOOC (8.23 HKD, +1.60%) and Sinopec (4.40 HKD, +0.92%) started this week on strong basis in line with oil price recovery. Financial companies such as AIA Group (40.10 HKD, +1.91%) and Bank of Communications (4.50 HKD, +0.67%) recovered some of their early loss caused by concerns over growth and margins. In addition, worries over developed markets central banks’ ability to spur growth and wind up inflation strengthen after Bank of Japan’s recent rules on negative interest failed to impress the market. On the winners side, China Unicom (9.04 HKD, +3.31%) and Hang Seng Bank (130.90 HKD, +3.64%) contributed positively to the Hang Seng index, which was up +0.67% since last Friday’s closing. In China, the Shanghai Stock Exchange Composite Index and CSI 300 gained +1.51% and +1.24%, respectively.
In South Korea, the KOSPI index decreased slightly -0.11% this week. Bank of Korea unchanged its key interest rate at 1.5%, opening speculation for a rate cut later this year. The South Korean auto sector registered some encouraging numbers with Hyundai Motor (149000 KRW, 0.00%) and Kia Motors (48000 KRW, -2.04%) seeing January European’s sales growing +9.1% for the former and +12.7% for the latter, on a year on year basis. Cosmax (121000 KRW, -2.81%) cosmetics manufacturer reported disappointing results amid China-related uncertainties.
The ASEAN region continued to show positive numbers as Thailand recorded GDP growth of +2.8% and Malaysia’s GDP expanded by +4.5%, both beating market estimate. On February 18th, Bank of Indonesia decided to cut its reference rate by 25bps to 7%. The Indonesian Central Bank also stated that private investment is expected to pick up this year due to greater room to ease monetary policy and a relatively more stable macroeconomic environment.
Guillaume Poncet, Analyst