Global funds sold about US$11 billion of equities and bonds in Asia’s emerging markets after the victory of US president-elect Donald Trump, as expectations for his economic policies sent US Treasury yields higher and sparked the US dollar’s strongest rally in eight years.
India suffered the biggest outflows between Nov. 9 and Friday last week, followed by Thailand, according to calculations by Bloomberg using official data.
The capital flight trims the year-to-date inflow into Taiwan, India, Indonesia, the Philippines, South Korea and Thailand to about US$55 billion.
“Fund outflows from emerging markets will probably continue for a while and then investors will see if Trump will carry out some policies he has mentioned before the election, such as fiscal stimulus and protectionist-type trade policies,” Masakatsu Fukaya, an emerging markets trader with Mizuho Bank Ltd in Tokyo, said in a phone interview. “Many of his policies may lead to a stronger [US] dollar and are negative on the emerging markets.”
The current wave of fund outflows is unlikely to match that of the so-called Taper Tantrum, when then-US Federal Reserve chairman Ben Bernanke’s signal to reduce monetary stimulus sent a shock wave through global markets, according to BlackRock Inc.
There are more positive factors now — including macro improvements in the region and narrowing of current-account deficits in Indonesia and India, the company said.
“You can continue to see some more outflows, but I don’t think it’s anywhere similar in terms of the overall scope of what we’ve observed in the Taper Tantrum,” said Neeraj Seth, Singapore-based head of Asian credit at BlackRock. “If you look at the Asian economies at that point, a number were on a very weak footing. Since that Taper Tantrum, you’ve seen a very significant move in terms of macro stability that you see in Asia.”
Bloomberg’s US dollar index climbed the most since 2008 in the past two weeks amid speculation that Trump’s reflationary policies would trigger higher interest rates.
By contrast, South Korea’s won has dropped 3.5 percent since the US election, Indonesia’s rupiah has weakened 2.7 percent and the Philippine peso has fallen 2.6 percent.
Trump said in a video that he would issue notification of intent to withdraw from the Trans-Pacific Partnership trade deal on his first day in office. He has vowed to spend US$1 trillion to rebuild and improve the US’ crumbling infrastructure.
Fund outflows:
Taiwan: Global funds were net sellers of US$2.75 billion in stocks from Nov. 9 to Friday. No comparable data are available for bonds.
India: Foreign investors were net sellers of US$1.5 billion in bonds and US$1.4 billion in equities from Nov. 9 to Thursday.
Thailand: Global funds were net sellers of 80.5 billion baht (US$2.3 billion) in bonds and US$534.3 million in stocks from Nov. 9 to Friday.
Indonesia: Overseas investors sold a net total of 13.9 trillion rupiah (US$1 billion) in local debt from Nov. 9 to Wednesday and US$444.2 million in equities from Nov. 9 to Friday.
South Korea: Global funds were net sellers of 30 million won (US$25,500) in listed bonds from Nov. 9 to Thursday and US$949.1 million won in equities from Nov. 9 to Friday.
Philippines: Investors were net sellers of US$170.6 million in stocks from Nov. 9 to Friday. No comparable data are available for bonds.
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