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Asian markets’ turmoil ease as traders take stock of a Trump presidency

Benchmark stock indexes regained some ground after plunging in every Asian market, while the price of gold rose

PUBLISHED : Wednesday, 09 November, 2016, 9:33am
UPDATED : Thursday, 10 November, 2016, 10:15am

The turmoil in Asia’s financial markets eased after knee-jerk sell-offs in stocks, currencies and commodities for safe haven assets gave way to a fresh look at the economic implications of Donald Trump in the White House.

Benchmark equity indexes fell in every Asian market, while the price of gold marked the biggest gains since Britain’s Brexit vote in June. Mexico’s peso was the biggest loser among emerging market currencies, weakening against the US dollar because of Trump’s frequent comments ostracising the nation. The won, the ringgit, the rupiah, the Singapore dollar and the Philippine peso weakened, while the yen strengthened as traders took refuge in the safe-haven currency.

“Trump winning is sending shock waves across the world,” said Nigel Green, founder and CEO of deVere Group. “Enormous volatility can be expected in the markets.”

Hong Kong’s key Hang Seng Index fell as much as 951.76 points, or by 4.2 per cent, before ending the day 2.2 per cent lower at 22,415.19. The Hang Seng China Enterprises Index that tracks H shares ended 2.9 per cent down at 9,378.66, after plunging as much as 5.3 per cent earlier.

On the mainland, the CSI 300 Index dipped 0.5 per cent to 3,353.05, while the Shanghai Composite Index dropped 0.6 per cent to 3,128.37 and the Shenzhen Composite Index retreated 0.6 per cent to 2,068.47.

Other Asian markets were also in turmoil. Japan’s Nikkei Average closed down 5.4 per cent at 16,251.54, after plunging as much as 6.2 per cent earlier.

Australia’s S&P/ASX 200 fell 1.9 per cent to finish at 5,156.6. India’s Sensex index declined 1.2 per cent to settle at 27,252.53.

Vote tallies showed Wednesday Trump had gained 279 electoral votes versus the Democratic candidate Hillary Clinton’s 218 votes, already past the 270 mark needed to win the presidential election.

According to the voting results, Republicans kept their control on the House and the Senate.

In commodity markets, gold futures for December delivery surged as much as 5 per cent to hit US$1,338.3 an ounce earlier in the day, as investors piled into safe-haven assets. Oil prices stabilised, with

December West Texas Intermediate crude rising 0.1 per cent, after dropping as much as 2.3 per cent to US$43.84 a barrel. January Brent crude rose 0.2 per cent, after declining as much as 1.7 per cent to US$47.99.

The Mexican peso weakened by as much as 10 per cent to a record low of 20.74 per dollar.

The Japanese yen strengthened to ¥103.55 per dollar, as traders took refuge in the safe-haven currency.

The renminbi fell to a six-year low, weighed down by increasing capital outflows from the country and the prospects of Trump taking action against what he used to call China’s currency manipulations.

“We expect Trump to start by labelling China a currency manipulator and to bring a number of perceived disputes to the World Trade Organisation,” said Paul Ashworth, chief US economist for Capital Economics.

Nonetheless, he anticipated a lower possibility for the Federal Reserve to raise interest rates in December, given the “adverse” market reaction.

Looking ahead, Léon Cornelissen, chief economist for Robeco Asset Management, said the increased uncertainty might haunt the equity markets for the coming weeks and sovereign bonds could benefit from their safe-haven qualities.

Turnover for Hong Kong’s stock market nearly doubled to HK$104 billion, compared with Tuesday’s HK$54 billion.

Li & Fung, which supplies clothes and toys to US retailers like Wal-Mart, was the biggest loser among blue-chips. It tumbled 4.5 per cent to HK$3.64.

Shenzhou International, a mainland-based textile exporter, also lost 4.7 per cent to HK$49.15.

Trump’s victory “is tremendously negative for Hong Kong, as Hong Kong’s economy is so dependent on exports, ” said Kevin Lai, an analyst for Daiwa Capital Markets.

Energy giant PetroChina and Sinopec both dropped 3.7 per cent, closing at HK$5.2 and HK$5.46 respectively.

However, gold miners bucked the general trend and pulled higher. Zhaojin Mining surged 8 per cent to HK$8.74, and Zijin Mining rallied 5 per cent to HK$2.74.

Gold-related shares soared on the mainland, with trading in the shares of Shandong Gold Mining, Hunan Gold Corp, and Zhongjin Gold halted after they surged by their 10 per cent daily limit.

With additional reporting from Alun John