Emerging Asia Rebound in Sight With Trade Caveats

(Bloomberg) -- This year is looking a little brighter for Asia’s emerging-market assets amid prospects of a less aggressive Federal Reserve. But the U.S.-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 favorite 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 general election this year, ranked No. 1, while the Philippines was at the bottom.

“A more flexible Fed is definitely positive for Asia, while the U.S.-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 0.8 percent so far this year as of 3:16 p.m. in Singapore, after dropping 4 percent in 2018, the most since 2015. The MSCI Emerging-Market Asia Index of equities has gained 5.6 percent, following a 17 percent decline. Asia’s local-currency bonds have increased 0.5 percent during the same period.

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 stabilize.

The survey participants:

• Australia & New Zealand Banking Group Ltd.
• DBS Group Holdings Ltd.
• Deutsche Bank Wealth Management
• FPG Securities Co.
• Fujitomi Co.
• Fullerton Markets Ltd.
• Kasikornbank Pcl
• Krung Thai Bank Pcl
• Kyoto University
• Legg Mason Global Asset Management and affiliates
• Malayan Banking Bhd.
• SBI Securities Co.
• Standard Chartered Plc
• UBS Asset Management

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