UK and Russia tensions weigh on Asia
Emerging stocks struggled higher and currencies were mixed yesterday amid mounting concerns over trade tensions and a worsening diplomatic row between Britain and Russia.
MSCI’s broader emerging market index climbed 0.1 per cent higher, but the gains masked diverging performances across major indexes with Asian equities across export-oriented economies such as Taiwan and Malaysia suffering.
Concerns over possible trade wars came to the fore again after the administration of US President Donald Trump pressed China to cut its trade surplus with the world’s largest economy by $100 billion.
Solid global trade in recent years has been a driver for sustained and broad-based economic growth, lifting many markets to record highs and with emerging markets have been some of the best performing assets in recent months. “The main risk that could undermine this positive outlook for emerging markets is the potential for full-scale trade wars,” said Rabobank strategist Piotr Matys.
“That would definitely undermine prospects for the emerging markets. Another risk factor is the faster pace of tightening of the Fed.”
Markets expect at least three hikes over the course of the year from the US Federal Reserve, and rinsing US interest rates will push up borrowing costs for emerging markets.
Meanwhile, the premium demanded by investors to hold emerging market hard currency debt over safe-haven US Treasuries has risen steadily over the week, adding 11 basis points and revisiting a near-four month high.
Rising diplomatic tension between London and Moscow after an attack with a nerve agent on British soil could also cast a shadow.
Prime Minister Theresa May pointed the finger firmly at Russian President Vladimir Putin as she outlined retaliatory measures in Parliament yesterday. This was followed by more harsh condemnation from the US at the United Nations, while the European Union and NATO also backed Britain.
For the most part Russian markets seemed to shrug off the developments. Stocks gained and the rouble firmed against the dollar by 0.4 per cent, though this followed three days of losses for the currency.
gave me some financial security. I bought a house each for my parents, so they’d be safe and secure financially for the rest of their life. Do you prefer paying in cash or by credit card? A bit of both. I always have cash on me. If it’s a big purchase, I pay by credit card, but pay 100 per cent off each month. When I travel, I have that currency with me before I go. In my safe I’ve roughly 15 different currencies in envelopes, so if I’m going again I have it to hand.
Do you plan for the future?
Very much; security and stability is important, especially as I have two young kids. I want to be able to provide for them, for their education, but also instil a work ethic and [an understanding of] the value of money. I’m not one of those parents that just gives them money all the time; they’ll have to earn pocket money. What would you raid your savings for? If somebody I loved were ill, in need, I’d pull money out to help.