For decades, Asia’s export powerhouses have followed a simple financial strategy: sell goods to the United States and then invest the proceeds in US assets.
As Donald Trump attempts to reshape global trade and the US economy, upending the logic behind the $7.5 trillion in investment in Asia, this model is now facing its biggest threat since the 2008 global financial crisis. Some of the world’s largest fund managers say the divestment has only just begun.
For those caught off guard, the pain has been severe. After Trump imposed tariffs on most of the world, the dollar was sold off, causing Taiwanese insurers to lose $620 million in April alone. Then, in early May, the New Taiwan dollar rose by 8.5% in just two days, which could lead to a currency loss of $18 billion on their unhedged US investments.
Even before Trump’s re-election as president, capital flows from Asia to the United States had already deviated from historical peaks. Now there are signs that this trend will accelerate: Japan’s largest life insurance company is seeking alternatives to US sovereign bonds, family offices are cutting or freezing investments, and a $96 billion Australian pension fund has announced that its allocation has reached its peak. The latest data shows that China reduced its holdings of US Treasury bonds in March.
“We are in a constantly changing world order and I don’t think we will return to the previous state,” said Virginie Maisonneuve, global chief equity investment officer at Allianz Global Investors in London. Allianz Global Investors manages 571 billion euros ($649 billion) in assets. “This is an evolution of the order since World War II, partly due to China’s competition with the United States in the economic and technological fields.”
There are many reasons why Asian investors are seeking alternatives to US assets: the growing budget deficit, the intensifying political polarization, and concerns over the aging of US infrastructure. The use of the US dollar, the world’s reserve currency, in sanctions against Russia has also raised concerns about the safety of the currency assets held by Asia. In addition, Trump’s tax cuts have exacerbated concerns about fiscal profligacy. On May 16, Moody’s, along with other rating agencies, downgraded the US credit rating, and the US lost its last top credit rating.
Technical analysis:
Gold: The price was blocked at the upper track of the 4-hour channel and fell back. It may need to clear the liquidity at 3280 before regaining the upward momentum. The focus for intraday low buying should be after a new low below 3280 is formed. For detailed positions, please consult the plugin.
(Gold 15-minute chart)
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the chart, please contact V: Hana-fgfg and note “666” in the message.
Nasdaq: After the Nasdaq swept through the liquidity above the yellow zone indicated by the plugin yesterday, it completed a pullback. The sell stop we set at the lower track of the yellow range can basically achieve a 2:1 profit-to-loss ratio. Continue to pay attention to the sell signal after the liquidity sweep today. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the chart, please contact V: Hana-fgfg and note “666” in the message.
Crude oil: Yesterday, the first green buy limit long position in crude oil achieved a profit-to-loss ratio of more than 1.5 times. Then, after sweeping the liquidity in the lower yellow area, it rebounded strongly, generating another wave with a profit-to-loss ratio close to 2 times. For today, we suggest holding the long positions, but it is essential to advance the protection. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the picture, please contact V: Hana-fgfg and note “666” in the message.
Today’s key financial data and events to focus on:
15:55 Germany’s seasonally adjusted unemployment rate for May
22:00 US Richmond Fed Manufacturing Index for May
