Thursday, September 5, 2013
STOCK FOCUS: G-20 Pledge On Syria, Emerging Econs May Lift Market
TOKYO (NQN)--Leaders from the Group of 20 major economies will meet in St. Petersburg, Russia, for two days on Sept. 5-6. Amid increasing speculation the U.S. Federal Reserve will scale back its bond-buying, the outflow of money from emerging markets is expected to be high on the agenda.
Shun Maruyama, chief Japan equity strategist at BNP Paribas Securities (Japan) Ltd., said concerns are growing over capital flight from fast-growing countries. Markets are awaiting word from the U.S. Federal Reserve over the direction of its quantitative easing program following two-day meeting of the Federal Open Market Committee that begins Sept. 17. The G-20 meeting will give momentum to the stock market if members agree to maintain the financial health of emerging economies, Maruyama said.
For now, many investors are sitting on the sidelines. If the G-20 can dispel uncertainty about the conflict in Syria and emerging economies, the Japanese stock market will be able to concentrate on economic fundamentals, he said. With corporate earnings solid, the yen is stable for now, leaving fundamentals strong.
Maruyama is now focused on the degree of support the U.S. and France can get from other world leaders for military intervention in Syria. Maruyama said market's uncertainty over the Syrian conflict will ease for the time being if Russia avoids a clash with the U.S. over the issue.
Yoshikiyo Shimamine, chief economist at Dai-ichi Life Research Institute Inc., said it is becoming more likely that Washington will intervene on its own. He said the G-20 gathering will not bridge the gap between Russia and China on the one hand and the U.S. on the other. Instead, the U.S. will urge other leaders to give a strike on Syria tacit approval.
Although the issue remains cloudy, Shimamine does not expect Syria to be a large drag on the Japanese stock market, as military intervention has already been factored in.
Although recent U.S. economic data has come in stronger than expected, exports to the U.S. from emerging countries appear unlikely to rise much. If the G-20 has words of cheer for emerging economies, investors will become less risk-averse, helping Japanese stocks gain momentum, along with the yen's downtrend against the dollar.