The buzz in Asia has been about China tripling stamp duties on stock trades. And if there is any truth in the latest rumors swirling around, a capital gains tax on shares is on the horizon, though Chinese officials have been quick to dismiss it. The same officials who on May 22 denied rumors of an increase in stamp tax, which was announced just a week later. The dust will have plenty of time to settle over the weekend. Expect Chinese markets to continue hogging everyone’s attention throughout the upcoming week.
Starting on Monday, steel companies will have to prove their strength as the world’s largest steel exporter, China, meets with its four biggest trade partners (the U.S., Japan, South Korea and the European Union) for bilateral discussions on steel exports. These dialogues are a part of the World Trade Organization’s efforts to ease the rift between competing nations.
On Tuesday, the People’s Bank of China’s new reserve requirement ratio kicks in. The PBOC raised the ratio by 50 basis points in May – a move to tighten liquidity in an attempt to keep China’s red-hot economy in check.
As the midweek rolls in, phase two of the U.S.-China economic dialogue take place – this time in Beijing. The two global giants will sit down to discuss the protection of intellectual property rights and market access of publications in China.
Also on Wednesday, Aussie aficionados will get their fix of Australian economic data, when they tune in to see if the Reserve Bank of Australia, keeps in line with expectations in holding interest rates steady. The government will also release first-quarter gross domestic product figures. Action Forex says that falling agriculture production could place a downside pressure on GDP growth, but the extent to which the broader economy will decline is yet unclear.
Later in the Wednesday trading session, the European Central Bank will meet to discuss its own interest rate policy. ECB council members say they are prepared to shift to a restrictive monetary policy if needed, in order to keep inflation under control in their fast growing economy. Markets have already priced in a quarter-point rate increase to 4%.
Squeezing out the week’s worth, Friday will mark the deadline for Cemex’s offer for resource giant Rinker, as the Mexican company puts pressure on shareholders to accept the $14 billion takeover bid. And while shareholder opposition has shot down several high-profile Australian takeover bids in recent weeks, analysts predict the Cemex bid is likely to go through as they have already won the support of stakeholder Perpetual, which owns 10% of Rinker.
Meanwhile in Japan, market players watch to see if April’s Machinery orders come in closer to expectations than the previous month. Participants are concerned that corporate capital spending, one of the key drivers of the economic recovery, could be slowing down.
On the earnings calendar, it will be a light week as the summer holidays get underway and people take time off work. However, Monday will be a sweet day to note as Krispy Kreme Doughnuts releases its fourth-quarter earnings. The American confectionery favorite has built a solid fan base in Asia and many donut lovers in the region will be watching its results closely.
And that’s the week ahead for Asia. We'll leave you with some special days of note …