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2016 Election: How Asian Markets Reacted as Results Came In
Donald Trump’s surprise victory moved currencies and stocks dramatically
Nov. 9, 2016 3:44 a.m. ET
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Markets across Asia reacted dramatically as results from the U.S. presidential election started pointing to a win for Donald Trump. Here’s a run down of the big moves—and what markets could expect next.
Japanese yen
The Japanese yen, often seen as a safe haven for investors in times of market turmoil, surged in Asia on Wednesday as Republican nominee Donald Trump headed toward victory over Hillary Clinton in the race for the White House.
The U.S. dollar fell 2.5% against the yen in recent action to 102.50, compared with 105.14 in late New York trading on Tuesday, according to Thomson Reuters data. That marked one of the currency pair’s biggest one-day swings since the day the U.K. voted to leave the European Union in June.
The dollar had briefly risen as high as 105.46 yen in early Asian trade. But as Mr. Trump started winning key states, upending market expectations for a Clinton win, the U.S. currency began to tumble, falling to a trough of 101.15 yen, its lowest level since Sept. 30.
The win by Mr. Trump, which few polls were forecasting heading into the election, is likely to bolster the yen further as investors pour money into assets considered havens, including gold and U.S. Treasurys. In addition, traders said that the Federal Reserve may now not raise U.S. rates this year, which could further boost the yen against the dollar.
That, in turn, could upend the Bank of Japan’s plans. With Japan’s economy still weak, the central bank has been counting on a weaker yen to help boost the country’s trade and growth.
A trump victory “would imply a much stronger yen than had been previously anticipated,” said Mitul Kotecha, head of Asia foreign-exchange and rates strategy at Barclays in Singapore
—Saumya Vaishampayan
Japan’s Nikkei stock index took a hammering as Mr. Trump’s victory appeared increasingly likely, dropping by more than 1,000 points at one stage, before closing down 5.36% at 16,251.54. That was the market’s biggest one-day fall since June 24, when the U.K. voted to leave the EU.
The index’s slump mirrored the sharp move in the Japanese yen.
The Japanese stock market is highly sensitive to the yen’s fortunes, because many of Japan’s largest listed companies are big exporters and make a sizable chunk of their profits overseas: for example, shares in Toyota Motor Corp. closed down 7% at 5,510 yen.
One concern for investors now is that Japan’s big car makers and other major exporters could be hit further if Mr. Trump follows through on some of his protectionist rhetoric.
Meanwhile, analysts said that any rebound for the Japanese market may have to wait until a clearer picture emerges of how the next U.S. president will shape foreign, defense and fiscal policy. Many investors had taken money off the table ahead of the election, fearing a surprise outcome.
“A lot of firepower has been put on the sidelines for this event,” said Jesper Koll, chief executive of asset manager WisdomTree Japan. “The question now is how credible a government [Mr. Trump] can put together for risk to return to the market. That will be the key issue.”
—Suryatapa Bhattacharya
Korean won
The Korean won, a currency that is often closely linked to sentiment about the global economy, was among the big losers in Asian trading hours. From 9 a.m. Hong Kong time, just as results started to come in from eastern U.S. states, the won began to weaken steadily against the U.S. dollar. Over the next three hours, the U.S. dollar gained 2.1% against the won.
South Korea’s exports accounted for 45.9% of its gross domestic product last year, according to data from the World Bank. The country is already on a U.S. government watch-list of those it considers could be manipulating their currencies to gain a trade advantage, and South Korea could be expected to lose out in the event of more protectionist policies from a U.S. government led by Mr. Trump.
However, the won’s slump on Wednesday was likely more related to the global panic gripping investors in hours after the U.S. election results started to arrive. Some analysts reckon its slide might be overdone.
“The Korean won is invariably the currency in Asia that is most sensitive to shifts in investor expectations,” said Tim Condon, chief Asia economist at ING in Singapore. “Whether it’s a buying or selling opportunity remains to be seen. But I’m inclined to view it as a buying opportunity.”
Though the outlook for South Korean trade is poor, faltering efforts to boost domestic consumption should allow the country’s trade surplus to widen and ensure further appreciation of the currency, he added.
—Gregor Stuart Hunter
Chinese yuan
China’s currency didn’t move much as results from the U.S. election rolled in—but investors reckon it could be a winner after Mr. Trump’s victory sinks in, at least in the near term.
The dollar is now buying 6.7625 yuan in China’s tightly controlled domestic market, down from 6.7800 at Tuesday’s close, a XX% drop. Traders attributed the yuan’s rebound almost solely to the dollar’s plunge in Asia, and said Mr. Trump’s win could help alleviate downward pressure on the currency.
“I think the impact of a Trump presidency on the yuan will last for at least two weeks after the election, which means the incessant depreciation pressure for the currency will take a breather as the dollar falls more,” said a Shanghai-based head of foreign exchange trading at a domestic bank.
As the pressure on the yuan eases, so will the intensity of capital outflows that China has been suffering in recent months, analysts said. This would give Beijing much needed breathing space to better manage its own economic slowdown, they added.
Still, Mr. Trump’s win could lead to rising tensions between Washington and Beijing over the yuan in the longer term. During the campaign, Mr. Trump vowed to label China a currency manipulator as soon as he becomes president, and has consistently accused China of unfair trading practices during the campaign.
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