HALISTER1: Asia Emerging Mkts Buoyed by Fed’s Dovish Moves, DB Says

Asia Emerging Mkts Buoyed by Fed’s Dovish Moves, DB Says

(Bloomberg) -- “Sharp dovish change in FOMC forecasts has profound implication” for Asia emerging mkts, Deutsche Bank economist Taimur Baig wrote Fri.
  • FOMC participants have made “sobering revisions” to projections of potential GDP, natural rate of unemployment and terminal fed funds rate
  • Fed officials must be more cautious due to factors such as impact of USD on U.S. exports, mkt volatility, China’s slowdown, commodity bust, Brexit
  • For emerging fixed income and FX mkts, particularly in Asia, Fed caution “is bound to be a source of prolonged respite”
    • “May well be considerable room left” for bond prices in countries such as India and Indonesia to rise
  • Policy makers in Malaysia, South Korea, Taiwan and Thailand may be compelled to cut rates even further; latter 3 may even entertain zero bound
  • Lower terminal rate, more protracted Fed policy cycle means more room for capital in Asia, given “plethora” of high yield/rates mkts
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Taimur Baig (Deutsche Bank AG)

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