Asian Stocks Drop as Investors Try to Assess Trump Presidency

  • Tokyo shares advance after better-than-forecast GDP report
  • Trump adviser hints at softer trade stance in comments to FT

The Case for Staying Bullish on Emerging Markets

Asian stocks fell for a second day as investors tried to gauge the impact of Donald Trump’s likely policies on the region’s markets. Tokyo shares rallied as economic growth beat estimates and the yen weakened.

The MSCI Asia Pacific Index dropped 0.4 percent as of 4:04 p.m. in Hong Kong, dragged down by Hong Kong, Indonesian and Philippine markets. The Topix index advanced 1.6 percent after Japan’s economy expanded more than forecast in the three months through September and the yen dropped 0.9 percent, boosting the outlook for exporters’ earnings. A raft of data released Monday showed China’s economy held ground in October following new measures to cool property markets in almost two dozen big cities.

Asian stocks are falling on speculation Trump will take a more protectionist approach to trade and that his plans to increase spending in the U.S. will push up inflation and result in a swifter pace of interest-rate increases by the Federal Reserve. Trump’s economic adviser, Anthony Scaramucci, repeated a pledge to spend $1 trillion on infrastructure in a Financial Times comment piece over the weekend, while sounding a softer note on trade, suggesting the president-elect is open to negotiations before slapping barriers on imports.

“In the short-term the election of Donald Trump as president is causing a bit of uncertainty and markets tend to overreact to that,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which manages about $121 billion. “I suspect the dust will settle down in the next couple of months and this sort of market overreaction will provide opportunities.”

While the value of equities worldwide swelled by more than $1 trillion last week amid optimism a Trump presidency will boost U.S. growth, the MSCI Emerging Markets Index posted its biggest weekly loss since May. There’s now an 84 percent chance the Federal Reserve will lift rates next month, Fed Funds futures show.

“Elevated risks around regional trade and security remain unresolved,” said Matthew Sherwood, Sydney-based head of investment strategy at Perpetual Ltd., which manages about $23 billion. “Emerging markets are suffering from the impact of higher U.S. interest rates.”

Japan’s economy expanded by an annualized 2.2 percent in the third quarter, faster than economists’ estimates for 0.8 percent growth, as a rebound in exports compensated for weak spending by consumers and companies.

“No doubt this is a solid reading,” said James Woods, Sydney-based investment analyst at Rivkin Securities. “It’s very encouraging to get such a good print on GDP, but the headwinds that the economy faces are still very significant. They really need to deal with the deflationary problems and that’s a hard hole to dig themselves out of.”

Hong Kong’s Hang Seng Index dropped 1.3 percent and the Hang Seng China Enterprises Index of mainland Chinese companies listed in the city retreated 0.8 percent to a three-month low. The Shanghai Composite Index added 0.5 percent.

Chinese industrial production rose 6.1 percent from a year earlier in October, compared with a median estimate for 6.2 percent in a Bloomberg economist survey and 6.1 percent in September. Retail sales climbed 10 percent while fixed-asset investment increased 8.3 percent in the first 10 months of the year.

Indonesia, Philippines

The Jakarta Composite Index fell 2.2 percent following a 4 percent plunge on Friday. The market remains tactically vulnerable if bond yields continue to rise and the currency weakens, Christopher Wood, chief equity strategist at CLSA Ltd. in Hong Kong, wrote in a note released Monday.

Malaysia’s benchmark measure lost 0.8 percent as data from MIDF Amanah Investment Bank Bhd. showed foreign investors pulled 800.4 million ringgit ($185 million) from the nation’s stocks last week in the third straight outflow.

The Philippine Stock Exchange Index declined 1.5 percent to the lowest level since March after falling 3.5 percent last week. Investors are concerned about the impact of a Trump presidency on the business-process outsourcing industry and remittances, said Robert Ramos, chief investment officer at Union Bank of the Philippines in Manila.

Australia’s S&P/ASX 200 Index dropped 0.5 percent. Newcrest Mining Ltd., Australia’s largest gold producer, sank 7.1 percent and Zijin Mining Group Ltd. lost 4.3 percent in Hong Kong after the price of the precious metal fell to a five-month low.

South Korea’s Kospi index slipped 0.5 percent, Singapore’s Straits Times Index lost 0.9 percent and Thailand’s SET Index decreased 1.6 percent. Indian markets were closed for a holiday.

New Zealand’s S&P/NZX 50 Index added 0.6 percent, with construction company Fletcher Building Ltd. pacing gains to rise 4 percent, after an earthquake in the South island caused widespread damage and killed two people. Tower Ltd., an insurer, slumped 7.1 percent.

E-mini futures on the S&P 500 index advanced 0.5 percent. The underlying gauge rose 3.8 percent last week, its biggest surge in more than two years.

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