Halister News

(Bloomberg) -- Indian bonds and the rupee are likely to be near-term outperformers following U.S. election, with major catalyst being India’s surprise ban on high denomination notes, which will suck the bulk of existing cash out of circulation, Goldman Sachs says.

• The move is positive for bonds because of the increase in banking system liquidity, eventual positive effects on the tax base and govt revenue, and likely short-term disinflationary effects on spending from cash constraints, analysts including Timothy Moe and Andrew Tilton write in note
• INR may face some volatility near term, but over the medium term, current account should improve on lower imports
• Read more: Modi hits multiple targets with corruption crackdown
• CNY likely to continue depreciating vs the dollar, reflecting sustained and significant domestic capital outflow pressure
• IDR, KRW, and MYR at risk of underperforming near term; overweight position makes Indonesia vulnerable during risk aversion
• Thai rates and currency could continue to be safe haven due to low volatility, low yield and high current account surplus
  • Thailand is largest underweight market in all EM local currency bond funds, which implies investors should at least partially cover some underweight position as they reduce overweight elsewhere