Emerging Asia hit by biggest foreign investor exodus since 2008

Emerging Asia hit by biggest foreign investor exodus since 2008

By: 
Bloomberg
18/06/18, 04:21 pm

BANGKOK (June 18): A falling tide lowers all boats, it seems. Amid an exodus from emerging markets, investors are pulling out of even Asian economies with solid prospects for growth and debt financing.

Overseas funds are pulling out of six major Asian emerging equity markets at a pace unseen since the global financial crisis of 2008 -- withdrawing US$19 billion from India, Indonesia, the Philippines, South Korea, Taiwan and Thailand so far this year, according to data compiled by Bloomberg.

While emerging markets shone in the first quarter, suggesting resilience to Federal Reserve tightening, that image has shattered over the past two months. With American money market funds now offering yields around 2% -- where 10-year Treasuries were just last September -- and prospects for more Fed hikes, the bar for heading into riskier assets has been raised. Headlines on trade disputes that could hit Asian exporters haven’t helped.

“It’s not a great set-up for emerging markets,” James Sullivan, head of Asia ex-Japan equities research at JPMorgan Chase & Co., told Bloomberg TV from Singapore. “We’ve still only priced in about two thirds of the US rate increases we expect to see over the next 12 months. So the Fed is continuing to get more hawkish, but the market still hasn’t caught up.”

While many emerging-market investors and analysts have praised Asian economic fundamentals, pointing to world-leading growth rates and political stability, some are starting to raise red flags as global liquidity starts to shrink. The Bloomberg JPMorgan Asia Dollar Index sank to a 2018 low on Monday, extending two weeks of declines after the Fed and European Central Bank both took steps toward policy normalization.

Yet some still remain optimistic. Bank of America Merrill Lynch expects some of the regional currencies including the baht and the Philippine peso to appreciate slightly by the end of the year, a research note sent Monday showed. Six of 10 best-performing emerging currencies so far this year are in Asia, led by the ringgit’s 1.2% advance and the Chinese yuan’s 1.1% gain.

Developing nations including Turkey, Indonesia, India and Argentina have raised rates, while Brazil’s central bank has sold extra foreign-exchange swap contracts in an effort to stabilize their markets.

In Asia this week, the Philippine central bank, which raised its key rate in May for the first time since 2014, is expected to lift the benchmark again by 25 basis points to 3.5%, a Bloomberg survey shows.

The Bank of Thailand will keep its benchmark unchanged at 1.5% the same day, according to a separate Bloomberg survey, though JPMorgan for one sees an increase coming next quarter. The baht has tumbled 4.6% against the dollar this quarter, despite Thailand having a current-account surplus in excess of a whopping 9% of gross domestic product. Thailand is also in the midst of the longest stretch of 3.5% plus GDP growth since the early 2000s, according to the IMF.

Thai Finance Minister Apisak Tantivorawong, for his part, said Monday he’s not concerned about capital outflows, and the country’s central bank need not follow the Fed in raising rates. Meantime, the baht hit its 2018 low in Monday trading, and the main Thai stock index was down 1.2% as of 2:02pm in Bangkok.

Right timing: STI’s upclimb supported by momentum and moving averages

SINGAPORE (Apr 20): There has been little change in the trend and chart pattern of the Straits Times Index. The index has been on a very glacial ascent towards 3,420, the target indicated when the index broke out of resistance at 3,190 in mid-Jan. Quarterly momentum eased during the past four trading sessions. The 100- and 200-day moving averages have turned positive. This coupled with positively placed DIs and rising ADX should continue to underpin the STI. The only cautionary signals are the somewhat overbought levels of short term stochastics and 21-day RSI, and stagnant vol....
Read More >>

SMI takes legal action against Hyflux; Maybank moves on Tuaspring

(Apr 20): SM Investments (SMI) has terminated its rescue agreement with Hyflux, it announced on Friday. Hyflux, on its part, had already on April 4 terminated the same agreement with SMI. SMI claims it has thus far abided by the agreement. “To clarify, SMI does not accept the purported termination of the Restructuring Agreement by Hyflux on 4 April 2019. This is because the termination was not in accordance with the terms of the Restructuring Agreement," said SMI. Under the agreement reached last October, SMI, led by Indonesian tycoon Anthoni Salim, was to have invested $530 million in....
Read More >>

CCT reports 3.8% higher 1Q DPU of 2.20 cents on higher property contributions

SINGAPORE (April 19): The manager of CapitaLand Commercial Trust (CCT) has reported a 1Q19 distribution per unit (DPU) of 2.20 cents, rising 3.8% y-o-y from 2.12 cents due to higher contributions from Gallileo and Asia Square Tower 2. Gross revenue and net property income (NPI) for the quarter increased by 3.5% and 3.4% to $99.8 million and $79.8 million, respectively. This comes after booking contributions from Gallileo – an office building in Frankfurt, Germany which the trust acquired a 94.9% stake in during June 2018 – as well as higher occupancy at Asia Square Tower 2, both of w....
Read More >>