Asian Markets Mostly Well Positioned After Fed Rate Cut, US Dollar Less Favoured – Wealth Managers

Editorial Staff

26 December 2024

The Asia markets – excluding Japan – have already priced in predicted interest rate moves and the region is well positioned in coming quarters, , so once the Fed cuts rates, central banks in the region will be able to start cutting rates as well,” he said. Easing monetary conditions and strengthening economies should be especially supportive to the region’s banks. Unlike in developed markets, mortgage and lending rates in ASEAN do not reprice significantly with rate changes. The net interest margins earnt by the banks have always been relatively high. From a technical perspective, the banks are often the largest companies in these markets therefore helping the performance of the markets at an index level.”

When the US central bank cut rates on Thursday, and issued its outlook, it was taken as a sign that the Fed is more comfortable about the path for inflation, and concerned to head off the risk of a recession.

Higher rates after the pandemic had jolted markets used to more than a decade of ultra-low rates and quantitative easing. A range of wealth managers have reacted to the Fed’s cut.

Secker said that in other parts of Asia, such as India, the relationship between these countries and US rates is “less notable.”

“India historically benefited from lower US rates and a weaker dollar, but this relationship has perhaps changed given the structural improvements we’ve seen in India’s economy over recent years allied to changing dynamics, namely the domestic demand, driving the Indian stock market,” Secker said. “China is going through an extended deleveraging process meaning monetary policy may not be as effective as in previous cycles.”

Secker added that a weaker dollar exchange rate gives China’s central bank more room to adjust rates to manage the economy.

Lombard Odier
Separately, Lombard Odier said it has turned neutral on the overall position of the dollar.

“With markets anticipating deeper Fed cuts compared with other central banks, the US dollar’s interest rate advantage is narrowing,” it said.

Lombard Odier added that it retains a cautious outlook on the euro and sterling.