(Bloomberg) -- The yen and Asian bonds are among the assets that are likely to continue to be impacted by the outcome of the US election as Donald Trump closes in on the presidency, according to analysts.
The Bloomberg Dollar Spot Index gained over 1%, while a gauge of Asian currencies fell 0.8%, with the Japanese yen and South Korean won dropping by more than 1%. Treasury yields surged, as Trump was projected as the winner across pivotal battleground states with his party set to control the Senate.
A Trump win “will put pressure on Asian markets overall — clearly with a huge focus on China,” said Nick Twidale, chief analyst at AT Global Markets Australia.
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Here are some other US election-related observations on markets:
Jenny Zeng, APAC fixed income chief investment officer at Allianz Global Investors:
A Trump win and a Republican sweep would push US-correlated Asian rates higher and curves steeper, boosting reflationary and term-premium expectations. A Trump win and split Congress may lead to more differentiation across Asian local bond markets. In general, more external-driven local bonds and FX such as the Indonesian rupiah and Korean won are more sensitive to broader emerging-market risk-off sentiment than more domestic-driven FX and bonds such as Indian government bonds and Chinese government bonds.
Samy Chaar, chief economist and CIO for Switzerland at Lombard Odier:
We see high-yield credit and gold performing well. Global equities, including US stocks, also have potential to rise in the next 12 months, as earnings expand and margins remain high. In the US market, financials, tech and defense should perform well under a Trump administration.
Maximillian Lin, Asia FX and rates strategist at Canadian Imperial Bank of Commerce:
Haven currencies like the yen will still weaken in reaction to ‘risk on’ from higher US yields and US equities, while risk currencies like the yuan will also react to the risk of further tariffs.
Raj Singh, a portfolio manager at Principal Asset Management in Hong Kong:
Within Asia we like some of the structural themes like India where the FX reserves are high and RBI policy is very stable. The other opportunity we like is Taiwan, where the semiconductor industry will keep benefiting from some of the biggest capital expenditures we are seeing from the AI side.
If it’s a red sweep, South Korea can get impacted as it has a big exposure to the US in terms of exports.
Ruchir Desai, a co-fund manager at AFC Asia Frontier Fund in Hong Kong
Trump will be anti-trade on China, which should be positive for Vietnam. But let’s see what he does on tariffs on imports from other countries. The US trade deficit with Vietnam has increased significantly - that is something Trump could look at.
Philip McNicholas, Asia sovereign strategist at Robeco in Singapore
The FX response is easier in many ways, it’s a stronger dollar backdrop. That is likely to make it harder for some markets to cut rates, so the front end is liable to stay elevated. Further along the curve, greater risk/term premia are likely needed amid the US’s continued withdrawal from global affairs, given the potential impacts on the movement and cost of goods and energy.
So, it’s likely the prospect of generally steeper curves and higher level of yields overall. Sadly, this is also likely to come amid a weaker regional growth backdrop as well, given that policy uncertainty in the US (beyond the import substitution mantra) is likely to lead to weaker investment flows, stressing the importance of domestic reliance for supply chains and government funding markets.
Charu Chanana, chief investment strategist at Saxo Markets:
The likelihood now leans toward either a Republican sweep or Trump gridlock. Trump gridlock could complicate tax cuts, but tariff measures may still pass, potentially leading to stagflation risks. This could pose challenges for US equity markets in maintaining their gains.
--With assistance from Alice French, Abhishek Vishnoi, Saburo Funabiki, John Cheng, Mia Glass, Iris Ouyang, Nguyen Kieu Giang and Matthew Burgess.
(Updates throughout.)
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