Emerging Asia market rebound in sight with China, trade caveats

A pedestrian stands on the Qianximen Bridge as buildings stand in the background in Chongqing, China. (Bloomberg pic)

BANGKOK: This year is looking a little brighter for Asia’s emerging-market assets amid prospects of a less aggressive Federal Reserve. But the US-China trade war saga and its impact on growth will keep traders on their toes.

That’s according to 14 strategists, traders and investors surveyed by Bloomberg. Malaysia’s ringgit was their favourite of eight regional currencies as the nation’s central bank is seen as unlikely to ease policy, while for bonds, China was the top pick. For equities, India, which will host a presidential election this year, ranked No. 1, while the Philippines was at the bottom.

“A more flexible Fed is definitely positive for Asia, while the US-China trade spat has already been priced in and has shown some signs of improvements, supporting the scenario of a rebound,” said Koji Fukaya, chief executive officer at FPG Securities Co. in Tokyo. “Given the region’s close trade relations with China, issues involving the Chinese economy is a very important factor driving Asian markets.”

The Bloomberg JPMorgan Asia Dollar Index started the year marginally higher, rising about 0.5% so far this year as of late Friday in Asia, after dropping 4% in 2018, the most since 2015. The MSCI Emerging-Market Asia Index of equities has gained 5.4%, following a 17% decline. Asia’s local-currency bonds have made little headway this year.

The respondents, surveyed between Jan 8 and Jan 17, were also asked about inflation and local central bank monetary policy outlooks. Following a period of dovish hikes from Asian central banks including Indonesia and Thailand, respondents now expect policy makers will keep rates unchanged as inflationary pressures abate and their currencies stabilise.