As the dollar’s rally has paused and US President Donald Trump’s initial tariff offensive has not been as severe as earlier expected, investors’ interest in emerging market stocks in Asia is heating up.
In the five days up to Friday, fund managers snapped up more than $700 million worth of stocks in developing Asian countries outside China, ending a seven-week run of capital outflows. The MSCI regional stock index excluding China delivered a 1.8% return to investors last week, narrowing the decline over the past six months to about 12%.
This rally further suggests that the situation in regional stock markets may be improving. Last year, regional stock markets underperformed their global peers due to a stronger US dollar and concerns that global trade tensions would affect them. Despite the recent gains, the MSCI Emerging Markets Asia ex-China Index still looks relatively cheap, trading at around 15 times its one-year forward earnings, compared with 22 times for the S&P 500.
Han Piow Liew, a fund manager at Singapore-based family office Maitri Asset Management Pte, said: “As the implementation of ‘Trump tariffs’ is slower and less severe than expected, sentiment in these markets may improve and trigger a rebound. Reduced trade barriers, coupled with a weaker US dollar and interest rate cuts, have created a more growth-friendly global environment.”
More and more investors believe that the tariff threats announced by Trump are mainly negotiation tactics.
For instance, in early February, Trump stated that he intended to impose a 25% tariff on imports from Canada and Mexico, but after these two countries agreed to some of his demands, he consented to postpone the tariff. He also delayed a plan to revoke tariff exemptions on certain goods from China and Hong Kong.
As concerns over tariffs have gradually subsided, the Bloomberg Dollar Index has dropped by more than 3% from its peak in early February. A weaker dollar is seen as beneficial for emerging Asian economies, many of which rely on dollar-denominated imports. This also gives these economies’ central banks more room to cut interest rates to support growth.
At least some signs suggest that the long-term upward trend of the US dollar is about to end. The latest data from the Commodity Futures Trading Commission shows that as of February 11, asset management companies have cut their bullish bets on the US dollar for four consecutive weeks, but the overall position remains long.
Manish Bhargava, CEO of Singapore-based investment management firm Straits Financial, said: “Even if trade tensions are not completely eliminated, easing them can create a more stable environment for businesses and investors in emerging markets. Lowering tariffs could alleviate trade tensions and benefit Asian economies that are heavily dependent on exports.”
On Monday in the Asian market, the US dollar index dropped from around 106.50 all the way to the 106.20 level, approaching the 106 psychological mark.
Technical analysis:
Gold: The limit order we recommended last Friday to buy at the green demand zone did not get filled. This morning, after the price pulled back to 2920, a new demand zone was formed around 2930. If there is a second pullback for confirmation within the day, you can consider buying again. Additionally, in the offshore market, if there is momentum to break through the 2940/45 area, you can also consider a buy stop order. For detailed positions, please consult the plugin.
(15-minute Gold Chart)
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Nasdaq: Last Friday, we clearly pointed out in the plugin that only after the price breaks below 21,926 and then rebounds can we consider going long. As a result, after the price broke below 21,926, there was no rebound at all, so it is absolutely not advisable to go long here. Today, we do not recommend shorting the index. Wait for the price to recover above 21,800 and then try to catch the rebound. For detailed positions, please consult the plugin.
(15-minute Nasdaq Index chart)
If you want to experience the same plugin as shown in the chart, please contact V: Hana-fgfg.
Crude oil: The price failed to break through the blue momentum key area last Friday, so the long position operation was not entered. Although the price has fallen all the way to 70.28, we are still not prepared for further short selling operations. Instead, today we should wait for the price to recover and stabilize above 70.50/60, and then try to catch the rebound of long positions. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
If you want to experience the same plug-in as shown in the picture, please contact V: Hana-fgfg.
Today’s key financial data and events to focus on:
17:00 Germany’s IFO Business Climate Index for February
21:30 US Chicago Fed National Activity Index for January
23:30 US Dallas Fed Manufacturing Index for February
