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There are still many uncertainties about how the US presidential candidate, Trump, will come to power next year, but the financial markets seem to have two things in mind - Trump's policies will push up inflation, Trade in the Asian region is unlikely to have obvious beneficiaries.
US Treasury yields have risen to their highest level since January, while emerging Asian currencies have fallen, partly because uncertainty has always led to capital flows to safer assets, as the market expects Trump's fiscal spending commitment to push up US inflation. , But also because part of Trump's campaign speech, triggered the market worried that the trade environment will be more biased towards protectionism.
"When the opportunity cost of global capital rises with US bond yields and the dollar rises simultaneously, investors will once again worry that emerging markets will once again suffer capital outflows," Citi analysts said in a report. The report pointed out that the market expected the United States to adopt an expansionary fiscal policy, the US 10-year yield of less than two days up 45 basis points.
Asia has felt the impact. Ringgit (MYR) against the dollar on Friday in the offshore market fell more than 5%, spreads soared, forcing the Malaysian central bank to limit offshore transactions to curb the decline.
Indonesian rupiah also suffered selling pressure, the authorities thus selling dollars to stabilize the rupee.
But Hong Kong and Singapore are the two most risky regions, not least because they trade heavily with the United States, but also because their policies are linked to the dollar. Hong Kong uses the pegged exchange rate between the Hong Kong dollar and the US dollar. Singapore uses the currency basket policy, and the US dollar accounts for a large proportion.
"Trump's fiscal and pro-business policies will lead to higher inflation and interest rates, and Singapore and Hong Kong will become frontiers and centers if there is any market adjustment," says a US-based investment manager in Hong Kong.
Not only is the dollar's appreciation equal to tightening monetary conditions in Singapore and Hong Kong, but if the Federal Reserve (Fed / Fed) raises more quickly than expected, it will take away cheap money that keeps emerging markets highly liquid.
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