Goldman Sees Stocks Rotation Hurting Won, Taiwan Dollar, Ringgit
(Bloomberg) -- Goldman Sachs Group Inc. warned that the South Korean won, Malaysia’s ringgit and the Taiwan dollar could weaken if growth stocks continue to slide.
The underperformance of growth stocks coincides with weaker tech-centric emerging market currencies when risk sentiment is less favorable, the bank’s New-York based strategist Karen Reichgott Fishman wrote in a note.
“Given the relatively large share of growth stocks in the U.S. market and low conviction on the broad risk outlook due to likely downgrades to Asia growth expectations — the won, Taiwan dollar, and ringgit could see the biggest volatility-adjusted losses,” Fishman said.
The outlook for tighter monetary policy in the U.S. and higher Treasury yields have been weighing on technology shares globally, prompting a rotation from growth to value stocks. Asian currencies are under pressure as prospects of quicker rate hikes in the U.S. bolster the dollar.
However, some say it may be time to rein in bearish bets on emerging market currencies as they are in a better position to withstand the impact of Federal Reserve rate hikes. The ringgit is Asia’s second worst-performing currency so far this year with a loss of 0.4% while the won is down 0.1% and the Taiwan dollar is up 0.1%.
Goldman also said it’s best to own the Canadian, Australian and Mexican currencies amid a growth-to-value stock rotation when global risk sentiment is constructive.
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