Asia shaky as Trump bets keep emerging marts under pressure

Asian shares were on the defensive on Monday, undermined by fears that the strength in the US dollar and rising US bond yields since Donald J. Trump’s election to president could accelerate fund outflows from the region back to US markets. Asian markets were steady to slightly lower, with Hong Kong’s Hang Seng flat, Australian shares down 0.2% and South Korea’s Kospi falling 0.3%. AROUND THE WORLD

TOKYO — Asian shares were on the defensive on Monday, undermined by fears that the strength in the US dollar and rising US bond yields since Donald J. Trump’s election to president could accelerate fund outflows from the region back to US markets.

Asian markets were steady to slightly lower, with Hong Kong’s Hang Seng flat, Australian shares down 0.2% and South Korea’s Kospi falling 0.3%.

But Japan’s yen-sensitive Nikkei bucked the trend, rising 0.8% to hit a 10- and- a- half- month high, thanks to the weaker yen.

European shares were expected to gain, with spread- betters seeing a rise of 0.2% in Germany’s DAX and Britain’s FTSE.

Mr. Trump’s unexpected election victory has led to a major repricing of assets, with investors rushing to buy US stocks and the dollar, while dumping bonds and emerging market assets.

Mr. Trump’s plan to expand fiscal spending, including more infrastructure spending, could be a game changer for markets that have long taken a policy mix of fiscal discipline and loose monetary policy for granted.

Under Trump’s reflationary policies, the Federal Reserve might have to raise interest rates faster than expected to curtail inflation, making US-dollar based assets more attractive at the expense of emerging nations.

“The markets driven by Trump may be just about to have run their course for now,” said Toru Ohara, chief investment officer at Okasan Asset Management.

“A rise in interest rates is, generally speaking, not good thing for stocks, especially for emerging markets. But if you think that US bond yields, which have been falling since 1982, may be bottoming out, that could mean the end of a low- growth/ low-inflation regime.”

Heightened uncertainty prompted investors to demand higher premiums for holding long-term US debt, with the 10year US Treasuries yield accelerating to 2.364% by last week from around 1.86% before the elections.

Such yield last stood at 2.340%, with a rise above its 2015 peak of 2.5% seen as having potential to spark a further sell- off as bond prices fall.

To be sure, investors have little idea of the extent that Trump could actually implement his proposals, which include putting tariffs on goods from major trading partners such as China and Mexico, and going ahead with heavy tax cuts that would widen the US fiscal deficit.

Some investors suspect markets will soon have a reality check as differences between the new administration and Congress over some of Trump’s policies begin to emerge.

“Next week, we have events that would make investors more sober, such as the OPEC (Organization of the Petroleum Exporting Countries) meeting and Italian referendum. By then this Trump-inspired market may have come to an end for now,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

Higher US yields are helping the dollar continue its bull run. The greenback rose to as high as 111.19, its highest level since early June. It last stood at 111.08. It has risen almost 10% from its low of 101.19 hit on Nov. 9, when Trump’s victory was initially seen as stoking uncertainty and triggering a rush to safer assets such as the yen.

The euro traded $ 1.0589, having hit a near one-year low of $ 1.0569 on Friday, while the Chinese yuan fell to an eight-anda-half-year low of 6.8992 to the dollar. —