Asia stocks up

Dol­lar soft­ness to help EM cur­ren­cies

Kuwait Times - - BUSINESS -

Asian stocks rose to three­week highs yes­ter­day, sup­ported by gains on Wall Street and grow­ing ex­pec­ta­tions the dol­lar may be peak­ing af­ter a hefty rally since the US elec­tion pulled funds out of emerg­ing mar­kets. Oil bounced as in­vestors looked ahead to de­vel­op­ments at the Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries (OPEC) meet­ing in Vi­enna later in the day. A six per­cent rise in the dol­lar against a trade-weighted bas­ket of cur­ren­cies since Repub­li­can Donald Trump’s up­set US elec­tion win has ham­mered emerg­ing mar­kets, as in­vestors pulled money out in fa­vor of US dol­lar­based as­sets on bets Trump will boost fis­cal spend­ing, growth and in­fla­tion.

More than $16 bil­lion have been sucked out of emerg­ing mar­kets in the two weeks fol­low­ing the Nov. 8 vote but stock ex­change data in In­dia, In­done­sia, Philip­pines, Tai­wan, Thai­land and South Korea in­di­cate the out­flows may be slow­ing. MSCI’s broad­est in­dex of Asia-Pa­cific shares out­side Ja­pan rose 0.3 per­cent, its high­est since Nov 11. Still, it is set for a sec­ond con­sec­u­tive monthly drop in a sign of the un­cer­tainty around Trump’s pres­i­dency and the out­look for global growth.

Aus­tralian shares were down 0.5 per­cent, the Nikkei up 0.1 per­cent and South Korea 0.4 per­cent higher. “We are start­ing to see some pull back on the US re­fla­tion trade and sta­bi­liza­tion in US rates,” said Fan Cheuk Wan, head of Asia in­vest­ment strat­egy at HSBC Pri­vate Bank. “As a re­sult we see good in­vest­ment op­por­tu­ni­ties in the Asian mar­kets in the com­ing months, par­tic­u­larly in mar­kets which have a strong do­mes­tic fo­cus and pos­i­tive re­form progress.” Valuations also re­main at­trac­tive for Asian stocks. On a price-to-book ba­sis, MSCI Asia ex-Ja­pan re­mains below a ten year me­dian value of 1.8 times, ac­cord­ing to Thom­son Reuters data.

In cur­rency mar­kets, the dol­lar con­tin­ued to take a breather against a tradeweighted bas­ket of its peers, down 1 per­cent in the last four days. The dol­lar’s re­cent gains - 7 per­cent ver­sus the yen and 3 per­cent against the euro - has come on the back of ex­pec­ta­tions of stepped up fis­cal spend­ing, higher in­fla­tion and a faster pace of mon­e­tary tightening by the Fed­eral Re­serve. How­ever, mar­ket watch­ers say fur­ther dol­lar gains will be hard fought. “The ex­pec­ta­tions phase will likely end soon as in­vestors are fo­cused on what the real im­pact of the Trump ad­min­is­tra­tion would be on the mar­ket,” said Yoshi­nori Shigemi, a global mar­ket strate­gist at JPMor­gan As­set Man­age­ment.

Trea­sury yields have edged lower af­ter peak­ing at 2.42 per­cent on the ten-year bench­mark bond last Fri­day. The curve, the gap be­tween the ten and two year yield, has steep­ened by 20 ba­sis points in the last three weeks. Oil slumped by roughly 4 per­cent on Tues­day be­fore bounc­ing some­what as most an­a­lysts con­cluded the OPEC bloc would cob­ble to­gether a deal in Vi­enna to cut pro­duc­tion to some ex­tent. The meet­ing starts at 1000 GMT. Brent fu­tures were up 0.9 per­cent at $46.80 per bar­rel while US crude gained 0.6 per­cent to $45.50 per bar­rel. A broad in­dex of com­modi­ties was down 2 per­cent. Spot gold was up 0.4 per­cent at $1192.74 an ounce. —Reuters

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