Investors say Asia’s exporters and supply chains have been able to better weather trade tensions, that China is ready to bolster its domestic demand and that India’s rapid growth is attractive. Equity desks in the region’s financial centres reported little panic as voters ushered Trump back into office on a platform of tax cuts and protectionism — a contrast to sharp declines in European auto and renewable stocks.
“We saw gradual buying continue to pick up,” said Shinji Ogawa, co-head of Japan cash equities sales at JP Morgan in Tokyo of trade on Thursday, with investors choosing industrials and financials.
“There are a few narratives that don’t necessarily allow the ‘Trump trade’ to dictate everything,” he said, pointing out rate rises on the horizon in Japan and a policy meeting in China this week expected to approve measures to boost the economy.
To be sure, the investment playbook derived from Trump’s first term has been to buy US stocks and their performance has drawn money out of Hong Kong and in to the S&P 500, dealers said. But those with global mandates or wishing to diversify are sticking with the Asia bets they have, following a bit of a drawdown — mostly out of India — through October.
“With this environment where cost of dollar capital is unlikely to fall that much...then you’re likely to see a lot more preference for growth,” said Ken Peng, head of Asia investment strategy at Citi Wealth in Hong Kong.
“So India is going to continue to do that.” A bounce in Japanese automaker stocks and a surge in banks and shares of heavy machinery firms, sensitive to capital expenditure, showed buyers’ focus there. In Vietnam, shares in industrial park owner Becamex leapt in anticipation of firms expanding manufacturing while developer Kinh Bac City, which has a golf and hotel project with Trump’s private conglomerate, hit its upward trading limit.
In Trump’s first term, China bore the brunt of his aggressive trade policy, and growth and the yuan took a hit. This time around, investors think they know a little more about what to expect from Trump and say China is better prepared.
“China is now better prepared for any curbs, whether technologically, militarily, or financially,” said Charles Wang, chairman of Shenzhen Dragon Pacific Capital Management Co
“We have a better understanding of Trump...and Trump may also be more cautious in his game with China to avoid lose-lose scenarios.” Wang sold shares in Chinese auto parts exporters, expecting a hit from tariffs, but was sticking with investments in China’s property sector, figuring it would receive help from the government regardless of Trump.
Other investors noted how China had lowered its share of exports by value headed directly to the US from above 20% in the early 2000s to 15% last year. They also expect the government would respond to trade tensions by backing local spending.
“Higher tariffs would only strengthen China’s dependency on domestic demand, which would translate into more supportive policies,” said Dong Baozhen, chairman of Beijing-based asset manager Lingtong Shengtai.
China no longer publishes timely equity flow data, but Morgan Stanley said foreign-domiciled long-only funds bought $11.1bn in Chinese shares through October, mostly early in the month.
There is also possible upside for Asia in Trump’s platform. BNP Paribas head of multi-asset investments for China Wei Li said Trump’s domestic tax cuts could benefit Chinese companies by lifting demand.
Others said his isolationist foreign policy could leave room for China to improve relations with Europe, or even with the US if Trump’s deal-making instincts are engaged. – Reuters
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