HSBC Goes Bearish On Asian Currencies By Shuli Ren
It’s about time sell-side analysts capitulate.
HSBC lowered its yuan forecast this morning, now seeing the yuan to fall to 7.20 per dollar, versus 6.90 previously, by the end of 2017.
The People’s Bank of China lowered its yuan fix for the 10th consecutive day to 6.8692. A stronger dollar coupled with a weaker yuan send HSBC’s forecast on other Asian currencies lower as well.
“The uncertainty for Asian currencies has risen after the US presidential election. Our working assumption is that the external backdrop has become less supportive. The US Fed could raise rates faster than the market is expecting, if fiscal stimulus is implemented.
Meanwhile, the spill-overs from stronger US growth may not be meaningful for Asian exporters, if the president-elect, Donald Trump, takes a more trade protectionist stance,” wrote analyst Paul Mackel.
So what’s the bank’s pecking order? HSBC is going for growth,
liking Indonesian rupiah, Indian rupee and Philippine peso the most.
Mackel wrote:
We have a longer term preference for currencies supported by domestic growth momentum (INR, IDR and PHP) and a robust FX policy framework (THB). Flexibility with INR and IDR, however, will be needed, given their sensitivity to core bond volatility and the current environment warrants caution. Nonetheless, both should hold up better than most other high-yielding EM FX.
We suggest avoiding those with US trade exposure and those that are susceptible to stronger capital outflow pressures (RMB and MYR). We also expect low-yielding but export-dependent currencies to underperform (KRW, SGD and TWD).
Since Trump’s surprise win, the yuan fell 1.3%, the South Korean won dropped 3%, the Indonesian rupiah fell 2.2%, the Malaysian ringgit tumbled 3.5%, and the Indian rupee was down 1.8%.
The iShares MSCI China ETF (MCHI) fell 5.3%, the iShares South Korea Capped ETF (EWY) dropped 7%, the iShares MSCI Indonesia ETF (EIDO) tumbled 10.5%, the iShares MSCI Malaysia ETF (EWM) fell 7.2%, the iShares MSCI India ETF (INDA) was down 7%.
Source: Barron's Asia
http://blogs.barrons.com/asiastocks/201 ... urrencies/
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