CCB’s Zhao Sees Yen, Singapore Dollar as Haven, No Equity Panic

James Zhao, chief investment officer in the international investment department of CCB Principal Asset Management Co. in Beijing, comments on the U.S. credit rating downgrade and the implications for Asian stocks and currencies. CCB manages 45 billion yuan ($7 billion) of assets.

The MSCI World Index of stocks fell to the weakest level since November last week. Futures on the S&P 500 Stock Index fell 2.4 percent to 1,169 as of 7:38 a.m. in Tokyo. Standard & Poor’s cut America’s top credit rating by one level to AA+ on Aug. 5. The European Central Bank said yesterday it will “actively implement” its bond-purchase program to prevent a crisis from spreading.

“The initial reaction could be for the markets to go down. U.S. Treasury bonds may go up as investor look for safe haven to park their money while demand gold will also continue to be strong for sure. For equity investors, I don’t expect to see widespread panic after the initial reaction.

“U.S. double-dip, China’s inflation and European fiscal debt dilemma will all have a huge impact on cyclical views. The important thing is that, the U.S. rating downgrade has been expected, discounted and people have little alternatives.

“Investors expect policy interventions to preempt any free-fall in financial markets. These include the speculated QE3, Europe debt consolidation and possibly a moderation in China’s monetary tightening and fiscal tightening after inflation pressure peaked.

“Among Asian currencies, perhaps the yen and the Singapore dollar will benefit, while the offshore yuan in Hong Kong is still not a very liquid market for international investors. Emerging-market economies, especially China, still enjoy better growth prospects.”

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net