Asian shares cautiously higher as investors await Fed policy update

BEIJING : Asian share markets got off to a cautious start on Wednesday, after another volatile Wall Street session, as investors braced for the outcome of the Fed's meeting late in the day and any hints about faster tightening of monetary policy.

Globally, U.S. stocks posted their worst week since 2020 last week, and MSCI's world index is on course for its biggest monthly drop since the COVID-19 pandemic hit markets in March 2020.The Fed is due to update its policy plan later on Wednesday, likely fleshing out timing for expected rate hikes and shrinking its massive balance sheet.

"We expect the Fed meeting, however, will not add to volatility. The central bank is set to only finish its quantitative easing in March and while it will signal interest rates are likely to be raised in March too, the Fed will endorse market expectations for quarterly 25bps hikes for its fed funds rate rather than more aggressive tightening this year," Mohi-uddin added.

"As long as turbulence remains relatively contained to equity markets, the bar for the Fed becoming dovish is high," said analysts at Nomura in a note. Hao Hong, Head of Research at BOCOM International, expects limited appetite from investors to hold big positions in Asia after heavy market selling, as the Chinese New Year approaches.

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