Paul Mackel, (pic) global head of FX research at HSBC Holdings Plc in Hong Kong, said the market is watching closely the recent Covid resurgence as it has caused short-term depreciation of some currencies. But the elephant in the room is whether the dollar has bottomed or not and “it’s not yet”.
HONG KONG: The delta coronavirus variant may herald a bout of weakness for emerging Asian stocks and currencies, with few analysts predicting a swift rebound as tighter curbs on movements cloud the growth outlook.
Regional assets took a hit yesterday, with the MSCI Asean Index of equities heading for its weakest close in seven months. Indonesia’s rupiah and the Thai baht slid to multi-month lows while the average spreads on South-East Asian corporate dollar bonds widened on Monday.Risk assets are contending with a reversal in fortunes as the spread of the more infectious delta strain coincides with growing expectations for the Federal Reserve to start withdrawing stimulus.
The transmission of the virus from Australia to Indonesia is raising fears that the nascent global growth recovery may be derailed.
“We might justifiably ask whether investors should question the consensus of a return to anything that resembles pre-Covid normality, or at the very least, whether we might need to endure rolling and haphazard restrictions that will last for years, ” Viktor Shvets, an analyst at Macquarie Capital Ltd in Hong Kong, wrote in a note.
“The probability of a Black Swan event is rising.”Meanwhile, Gary Dugan, chief executive officer at the Global CIO Office in Singapore said: “The UK has shown that the variant is not such a health challenge if people have been vaccinated. We are concerned that Australasia and the smaller markets in Asean could continue to be impacted. We remain cautious on Asean equities. Watching for any sharp increase in Covid cases in Asean.”
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