Trump’s Election Win Shifts Focus to India and Japan
Tariff Risks Loom Large Over Chinese Assets
Donald Trump’s election victory has sent shockwaves through Asia’s largest equity markets, with investors reassessing their strategies in light of the president-elect’s anti-China stance. As tariff risks threaten to derail China’s economic revival, market watchers predict a shift in funds towards India and Japan.
India: A Manufacturing Alternative
India, with its domestic-driven economy, is seen as a safe haven from global risks. As a manufacturing alternative to China, India’s appeal lies in its large workforce and competitive labor costs. Veteran emerging-market investor Mark Mobius notes that supply chains are already moving away from China, benefiting not only India and Japan but also other Southeast Asian nations.
Japan: Indirect Beneficiary of Trump’s Policies
Japanese stocks are expected to benefit from Trump’s reflationary economic policy, which is likely to keep interest rates high and boost the dollar. A weaker yen will advantage Japan’s exporters, making them more competitive in the global market.
China’s Economic Revival Complicated
The threat of tariffs complicates Beijing’s efforts to revive the economy and lift market sentiment through stimulus measures. The ongoing legislature meeting is crucial for investors, who will be watching for signs of meaningful announcements. Should these announcements fall short of expectations, investors may rotate China exposure into Japanese equities.
Short-Term Hit to Chinese Stocks
Republican proposals to impose higher tariffs on Chinese goods will likely weigh on growth in the world’s second-largest economy. Morgan Stanley strategists believe that the tariff headwind could discount the net-net effect of potential reflation measures.
India and Japan Rally, China Slumps
As Trump’s victory became clear, the MSCI Japan Index and the MSCI India Index rallied at least 1.5% each, while the MSCI China Index slumped over 2%. Chinese stocks rebounded on Thursday, with the MSCI gauge rising as much as 1.8%, after exports beat estimates.
Taiwan and Southeast Asia Remain Resilient
Taiwan and Southeast Asia may also remain resilient under Trump, according to JPMorgan Asset Management’s Strategist Tai Hui, with chip exports supporting Taiwan and supply-chain shifts benefiting Southeast Asia.
Challenges Ahead for India and Japan
While India and Japan are poised to benefit from Trump’s policies, they also face challenges of their own. India is experiencing a slowdown in economic and earnings growth, while Japan is staring at the possibility of excessive currency moves and potential intervention as the yen weakens against the dollar.
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