(Bloomberg) — Most Asian shares dropped as traders weighed the impact of president-elect Donald Trump’s likely policy agenda and the stronger dollar on regional economies.
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The benchmark MSCI Asia Pacific Index slipped for a third day as Treasury yields rose, threatening to lure funds back to US assets. Bloomberg’s gauge of the greenback climbed for a fourth session, edging back toward a one-year high. Hong Kong shares led regional equity declines with investors still concerned about the lack of new stimulus measures from China.
While the so-called Trump trade helps boost the dollar and US stocks, the impact of the former president’s policies are expected to be less positive on assets elsewhere in the world. His plan to boost tariffs is set to weigh on economies around the globe, especially countries such as China which are major exporters to the US.
“There are question marks around another round of Trump tariffs, the deficit and upward pressure on the dollar, forcing the Fed to slow the pace of easing,” said Phillip Wool, head of portfolio management at Rayliant Global Advisors. “All of those anxieties seem to be registering more significantly with investors today and weighing on Asian shares.”
Treasury 10-year yields climbed as much as three basis points to 4.34%. The Bloomberg Dollar Spot Index ticked higher for a third day after jumping 0.5% Monday. Oil was little changed following its biggest decline in two weeks.
“Better economic data, perhaps a too-dovish Fed, and more policy details from the Trump administration could push Treasury yields higher,” LPL Financial strategists wrote in a client note Monday. “It will take negative economic surprises for yields to fall meaningfully from current levels.”
Emerging Asian currencies weakened against the dollar, with the Thai baht and Indonesian rupiah leading declines.
China’s benchmark CSI 300 Index swung between gains and losses, drawing at least some support from a report saying the authorities are planning to cut taxes for home purchases to help revive a moribund housing market. A Bloomberg Intelligence gauge of developers’ shares climbed as much as 0.3% after the news, before falling back.
“It’s not enough to get investors excited about a housing recovery — the demand is not there and this doesn’t really stimulate demand,” said Sat Duhra, a fund manager at Janus Henderson Investors in Singapore. “Recent inflation shows that turning around this deflationary slide is more difficult to change and piecemeal measures won’t change the low confidence in China.”
