Investors are selling the yen and turning to cash, India, pockets of China and the Singapore dollar markets ahead of the US, which could shake up global money and trade flows.
Asia’s financial markets are on the front line of what could be a wild ride when the votes are counted and in the coming months as the region becomes an export powerhouse and stocks and currencies are sensitive to changes in US trade policies.
This has caused money managers to move away from outright bets on the outcome and instead look to reduce exposure to vulnerabilities from Japanese manufacturers to Hong Kong stocks and bet on India or China that would gain regardless of the US leader.
“We actually look at China as a decent place to hide,” said John Withhar, who runs an Asian hedge fund at Pictet Asset Management, since the market has a lot of domestic drivers and less correlation with global asset movements.
“The best thing we can do is just sit on the sidelines and wait,” he said, having already cut bets in Japan, where tariffs pose a risk to automakers, and Hong Kong, where foreign selling of Chinese assets is likely to decline. to focus.
In the final stage of the November 5 elections, the betting odds pushed Republican candidate Donald Trump to Democrat Kamala Harris, and financial markets moved to sell US bonds and buy dollars in anticipation that the Trump administration would lead to increased inflation.
In Asia, it is preferable to sell the low-yielding yen against the dollar. Nick Ferris, chief investment officer at Vantage Point Asset Management, does not trade elections directly, but maintains a short position in yen and owns Japanese stocks.
He added: “Our feeling is that Donald will win and it will probably be a sweep for the Republicans.”
“The implication for the dollar is that Trump may be a little more pro-growth…the result is likely a higher path for interest rates, perhaps pricing in more rate cuts that are still in play for the Fed.” The yen’s decline of 6.5 percent against the dollar during the month of October is the largest decline of any G10 currency.
Investors say they are also looking for markets that are less exposed to tariff risks or where other big tailwinds, from demographics to promised Chinese stimulus plans, appear to be blowing.
The Singapore dollar will stand tall against regional currencies, with the city-state steering the currency, while Indian stocks may be insulated, said Ray Sharma Ong, head of multi-asset investment solutions for Southeast Asia at abrdn.
“India benefits from strong domestic economic growth, reduced exposure to potential trade conflict due to a lower export-to-GDP ratio and a tilt towards services exports, supported by strong non-technology earnings,” he said.
“We also expect the stock market to favor defensive sectors with less exposure to exports and potential tariffs, such as commodities and utilities.” As a result of votes being counted or disputed, the political implications may not be immediately apparent.
“Frankly, I don’t know what Trump can accomplish,” said John Hempton, founder and chief investment officer of hedge fund Bronte Capital in Sydney.
“If I don’t really know what I’m doing, I’ll just try to get out of the way — try to keep the damage to a minimum.”
However, Goldman Sachs notes that emerging market funds have increased their exposure to China and North Asia over the past month, which could accelerate quickly once the elections pass and investor uncertainty disappears.
“We see emerging market stocks as well positioned to outperform next year regardless of the outcome,” as China shores up its economy and the U.S. cuts interest rates, said Gary Tan, portfolio manager at Allspring Global Investments.
“We see a Harris win as slightly more positive for emerging markets.”
