Emerging Asia Sees $11 Billion Outflow on Dollar’s Rally

(Bloomberg) -- Global funds sold about $11 billion of equities and bonds in Asia’s emerging markets after Donald Trump’s victory in the U.S. presidential election as expectations for his economic policies sent Treasury yields higher and sparked the dollar’s strongest rally in eight years.

India suffered the biggest outflows between Nov. 9 and Nov. 18, followed by Thailand, according to calculations by Bloomberg using official data. The capital flight trims the year-to-date inflow into India, Indonesia, the Philippines, South Korea, Taiwan and Thailand to around $55 billion.

“Fund outflows from emerging markets will probably continue for a while and then investors will see if Trump will carry out some policies he has mentioned before the election, such as fiscal stimulus and protectionist-type trade policies,” Masakatsu Fukaya, an emerging markets trader with Mizuho Bank Ltd. in Tokyo, said in a phone interview. “Many of his policies may lead to a stronger dollar and are negative on the emerging markets.”

• India: Foreign investors have been net sellers of $1.5 billion in bonds and $1.4 billion in equities from Nov. 9-17
• Thailand: Global funds were net sellers of 80.5 billion baht ($2.3 billion) in bonds and $534.3 million in stocks from Nov. 9-18
• Indonesia: Overseas investors sold a net total of 13.9 trillion rupiah ($1 billion) in local debt from Nov. 9-16 and $444.2 million in equities from Nov. 9-18
• South Korea: Global funds were net sellers of 30 million won ($25,500) in listed bonds in Nov. 9-17, and $949.1 million in Nov. 9-18
• Philippines: Investors were net sellers of $170.6 million in stocks in Nov. 9-18. No comparable data is available for bonds
• Taiwan: Global funds were net sellers of $2.75 billion in stocks in Nov. 9-18. No comparable data is available for bonds

The current wave of fund outflows is unlikely to match that of the so-called Taper Tantrum when then Federal Reserve Chairman Ben S. Bernanke’s signal to reduce monetary stimulus sent a shock wave through global markets, according to BlackRock Inc. There are more positive factors now including macro improvements in the region including narrowing of current-account deficit in Indonesia and India, the company said.

“You can continue to see some more outflows but I don’t think it’s anywhere similar in terms of the overall scope of what we’ve observed in the Taper Tantrum,” said Neeraj Seth, Singapore-based head of Asian credit at BlackRock. “If you look at the Asian economies at that point, a number were on a very weak footing. Since that Taper Tantrum, you’ve seen a very significant move in terms of macro stability that you see in Asia.”

Bloomberg’s dollar index climbed the most since 2008 in the two weeks just past amid speculation that President-elect Trump’s reflationary policies will trigger higher interest rates. By contrast, South Korea’s won has dropped 3.5 percent since the U.S. election, Indonesia’s rupiah has weakened 2.7 percent and the Philippine peso has fallen 2.6 percent.

Trump said in a video that he will issue notification of intent to withdraw from the Trans-Pacific Partnership trade deal on his first day in office. He has pledged to spend $1 trillion to rebuild and improve the nation’s crumbling infrastructure.

--With assistance from Garfield Reynolds and Lilian Karunungan To contact the reporters on this story: David Finnerty in Singapore at dfinnerty4@bloomberg.net, Yumi Teso in Bangkok at yteso1@bloomberg.net. To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net, Tomoko Yamazaki, Nicholas Reynolds