BENGALURU: Emerging market stocks across Asia dropped in a broad-based selloff on Tuesday, with shares in the Philippines and Singapore leading the decline, as concerns over a US slowdown and potential recession deepened.
The MSCI EM stocks index dropped 0.6%, reflecting concerns that the trade war triggered by US President Donald Trump’s tariff measures could negatively impact the economy, rattling markets worldwide. An index of Asian emerging market equities slipped 0.6%.
In Singapore, shares dropped 1.9% to a one-month low, led by heavyweight banks, which lost between 2% and 4%.
Manila stocks fell 2.4%, snapping a six-day winning streak, while Malaysia dropped 1.2% to a one-year low.
Equities in Thailand slipped to their lowest level since April 2020, while South Korean shares fell more than 2% to touch their lowest levels since early February.
The prospect of an economic downturn drove a stock market selloff in the US on Monday, with investors worldwide now re-evaluating their bets on Trump’s policies, which no longer seem to be as market-friendly and pro-businesses as previously anticipated.
Asian markets have lost significant value over the past few sessions as investors revaluate the impact of Trump’s policies in the region, particularly on China, the top trading partner of most developing Asian economies.
Markets are fearful of the potential impact of tariffs on Asian exports as well as global trade and ultimately investments, while signals of Chinese deflation further add to the concerns, said Trinh Nguyen, senior economist at corporate and investment banking firm Natixis.
“The silver lining of all of this is that it means the Federal Reserve will likely cut rates and soften the US dollar, which would help emerging Asia.”
Stocks in Malaysia, the Philippines and Indonesia have dropped between 5% and 8% so far this year, while Thailand has declined over 16%.
Meanwhile, Singapore and South Korean shares have registered year-to-date gains, driven by strong performance from banks in Singapore and tech stocks in South Korea.
“And with US exceptionalism ebbing, perhaps fund flows will pivot to other growth areas to diversify, such as EM Asia,” Nguyen said.
Currencies were range-bound throughout the day, with the peso continuing its upward trend with 0.4% gain, while the rupiah remained the worst-performing currency of the year, extending its losses by 0.6% on the day.
“As markets move from downgrading US exceptionalism towards US recession fears, the greenback could transition from being sold off to being sought after as a haven currency,” Philip Wee, senior currency economist at DBS Bank, said in a note.
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