By Tom Westbrook and Samuel Shen
SINGAPORE (Reuters) – Asia and even China are emerging as surprisingly resilient investment markets as Donald Trump returns to the White House, while fund managers are optimistic the region can withstand tariffs better than Europe.
Investors say Asian exporters and supply chains have weathered trade tensions better, China is ready to boost domestic demand and India’s rapid growth is attractive.
Stock bureaus in the region’s financial centers reported little panic as voters returned Trump to power on tax cuts and protectionism – a contrast to sharp declines in European auto and durable stocks.
“We saw gradual buying pick up further,” Shinji Ogawa, co-head of Japan Cash Equities Sales at JP Morgan on Tokyo of Trade, said Thursday, with investors opting for industrials and financials.
“There are some stories that don’t necessarily allow the ‘Trump trade’ to dictate everything,” he said, pointing to interest rate hikes in Japan and a policy meeting in China this week that was expected to approve measures to stimulate the economy. .
It’s fair to say that the investment playbook derived from Trump’s first term has been to buy U.S. stocks and their performance has sucked money out of Hong Kong and into the S&P 500, dealers said.
But those with global mandates or looking to diversify continue to hold on to their Asian investments, after a small pullback – mainly from India – through October.
“In this environment where the cost of dollar capital is unlikely to fall that much… you’re likely to see a lot more bias towards growth,” said Ken Peng, head of Asia investment strategy at Citi Wealth in Hong Kong.
“So India will continue to do that.”
A rebound in shares of Japanese automakers and a rise in banks and heavy equipment maker shares, which are sensitive to capital spending, showed buyers were focusing there.
In Vietnam, shares of industrial estate owner Becamex rose in anticipation of companies expanding production, while developer Kinh Bac City, which has a golf and hotel project with Trump’s private conglomerate, hit its upside trading limit.
BETTER PREPARED
During Trump’s first term, China bore the brunt of his aggressive trade policies, and growth and the yuan took a hit. This time, investors think they know a little more about what to expect from Trump and say China is better prepared.
“China is now better prepared for any constraints, whether technological, military or financial,” said Charles Wang, chairman of Shenzhen Dragon Pacific Capital Management Co.
“We have a better understanding of Trump… and Trump can also be more careful in his play with China to avoid lose-lose scenarios.”
Wang sold shares in Chinese auto parts exporters, expecting tariffs to fall, but continued to invest in China’s real estate sector, believing it would get government help regardless of Trump.
Other investors noted that China had cut its share of exports, in terms of value going directly to the U.S., from more than 20% in the early 2000s to 15% last year. They also expect the government to respond to trade tensions by supporting local spending.
“Higher rates would only reinforce China’s dependence on domestic demand, which would translate into more supportive policies,” said Dong Baozhen, chairman of Beijing-based asset manager Lingtong Shengtai.
FLOW STATE
China no longer publishes current data on stock flows, but Morgan Stanley says foreign-based long-only funds bought $11.1 billion of Chinese stocks through October, mostly at the start of the month.
The yuan’s decline signals some outflows since then, but these are limited by expectations that Beijing would make a major stimulus announcement this month.
There is also a potential benefit for Asia in Trump’s platform. Wei Li, head of multi-asset investments at BNP Paribas, said Trump’s domestic tax cuts could benefit Chinese companies by boosting demand.
Others said his isolationist foreign policy could leave room for China to improve relations with Europe, or even the US if Trump’s deal-making instincts are harnessed.
“Trump is a businessman through and through,” said Robert St Clair, head of investment strategy at Fullerton Fund Management in Singapore. “He knows what’s at stake,” he said.
“He knows that China has significant market share in a number of key high-value end industries… and China seems to be handling the tariff stress very well. He knows the tariffs he can’t push too far.”
(Additional reporting by Summer Zhen in Hong Kong; Editing by Sam Holmes)
