The weaker dollar reinforced the Asian stock rally by attracting flows

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The weaker US dollar supports the case for a further rally in Asian stocks despite nervousness caused by spikes in coronavirus cases.

The greenback’s decline – about 4% in July alone – could boost flows to Asian markets, fund managers and strategists have said. The MSCI Asia Pacific Index topped its fourth monthly gain on Friday, helped by tech stocks. Taiwan Semiconductor Manufacturing Co. briefly became the 10th most valuable company in the world last week. Samsung Electronics Co. rose about 7%.

“A weaker US dollar tends to be beneficial for Asian stocks,” said Ayaz Ebrahim, portfolio manager at JPMorgan Asset Management in Hong Kong. appetite that benefits the asset class. “

The outlook for some Asian economies is gradually improving, although the pace of the recovery remains uncertain due to the pandemic. The first official indicator of China’s economy in the second half of the year showed upward momentum, while South Korea’s industrial production in June beat estimates.

“Emerging Asia continues to be one of the brightest spots in our outlook for global recovery, and we have seen that which is most illustrated in China,” said Emily Weis, macro strategist at State Street Corp . in Boston.

Sanford C. Bernstein strategists recently moved overweight emerging markets for the first time in two years and said they favored developing countries in Asia.

Although foreign flows to Asian equities have been weak this year, there are signs of an upturn in appetite. Foreign purchases of South Korean stocks peaked for 2020 in the week ended July 29, while Japan recorded net monthly inflows for the first time since January, Jefferies said on Friday, citing the data. of EPFR Global.

As always, risks abound. Japan and Australia are among the countries struggling with an increase in infections. The June quarter results underscore the long struggle for a full global recovery. For Citigroup Inc., commodity-rich Latin America is a better bet than Asia, as the latter is more threatened by geopolitics, with Democrats and Republicans taking a negative view of China.

Many Asian countries depend on exports and inbound tourism, and growing tensions between the United States and China could weigh on stocks in the region, said Sean Taylor, director of Asia-Pacific investments at DWS Group.

“To see strong performance in Asian stocks, we need to see a sustained recovery in global growth and risk sentiment, and earnings ahead,” Taylor said. A weaker dollar is more likely to benefit Asian bonds, he added.

Tech stocks are among those that have led the Asian rally since the March lows. The tech sectors in Taiwan and South Korea – particularly semiconductors – are expected to benefit from increased flows to the region, said Andy Wong, senior director of multi-asset investments at Pictet Asset Management.

This story was posted from an agency feed with no text editing.

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