Of the emerging markets, Malaysia’s ringgit plunged to its weakest level in more than 12 years as concerns mounted over Donald Trump’s presidency having a negative impact on trade across Asia, according to Lukman Otunuga, research analyst at FXTM, which provides international brokerage services and access to global currency markets.
He said the dollar’s resurgence amid the revived US rate hike expectations played a part in the ringgit’s selloff as bears installed repeated rounds of selling. Bursa Malaysia was also vulnerable to losses, concluding the week -1.14 per cent lower as investors utilised the period of uncertainty to profit-take.
Emerging markets may be exposed to further punishment in the shorter term as the terrible combination of dollar strength, rising US rate hike expectations and trade fears repel investors from the emerging markets’ assets.
He said economists will be looking towards the latest inflation report from Malaysia in the coming weeks which should provide further clarity on the health of the Malaysian economy, noting that Malaysia’s inflation for September stood at 1.5 per cent with predictions for October’s figure edging to 1.6 per cent amid higher food prices.
Outside of Malaysia, he said investors may pay very close attention to how markets digest the Trump victory with extra attention placed on global stocks.
Risk aversion remains rife which should empower safe-haven assets such as gold and the Japanese yen. With expectations on the rise over the Federal Reserve raising US interest rates this year, the dollar is currently king and such could pressure emerging market currencies further.
He said that although Wall Street was a star performer last week as the Dow Jones lurched to all-time highs, questions should be asked over the sustainability of the current rally.
Financial markets have been clearly Trump-driven with more time needed for investors to fully digest and weigh the impacts of a Trump presidential victory, he added.
Meanwhile, Knight Frank’s global head of research, Liam Bailey, said the election result creates both challenges and opportunities to global property markets.
“While there is some uncertainty regarding the economic impact of President Trump’s policies, the US will remain the critical global source and destination for property investment flows.”
Bailey also said the business environment in the US as well as innovations in business services and technology providers based in the US have both helped to drive property market demand globally – it is an incredibly strong platform to build from.
Knight Frank Asia Pacific’s head of research, Nicholas Holt, said the election is already having a significant impact on currency and equity markets in the Asia Pacific region.
Holt said that similar to the impact of Brexit, the result of the US presidential election is likely to cause further uncertainty in terms of the global economic recovery.
It is also likely to lead to a rush towards safe haven assets, along with gold and triple-A rated government bonds and prime real estate in key global city markets.
“From the perspective of cross-border real estate investors, concerns over the US could spur increasing amounts of interest into markets such as Australia, Japan and Europe, although the weakening of the US dollar could provide opportunities for opportunistic foreign capital to look at real estate in the top-tier US cities at an effective discount,” he said.
Holt added that the intrinsic qualities of property – that in times of uncertainty it acts as a safe haven, and in times of economic expansion benefits from rental and capital growth – means that despite all the uncertainty of 2016, real estate markets will continue to be active with prime assets in the world’s most resilient cities remaining in significant demand.
According to a Reuters report, Trump’s anti-globalisation sentiment could hurt Asian market.
The Republican party has always been pro-business and pro-free trade, but this could end with Trump, who has called for American “economic independence” which includes opting out of long-standing trade arrangements.
He has also called the Trans-Pacific Partnership (TPP), a 12-country trade deal that would encompass around 40 per cent of total global output, a “terrible deal” for the US.
The report said Asia stands to lose from a reversal of globalisation. If tariffs in the US on goods from Asia increase, the entire relationship breaks down.