Investors Shift Strategies Amid U.S. Election Considerations

By Summer Zhen and Ankur Banerjee
HONG KONG/SINGAPORE (Reuters) – Investors are selling yen and taking shelter in cash, India, pockets of China’s markets, and Singapore dollars ahead of a U.S. election that could shake out global money and trade flows.

Asia’s financial markets stand on the front line of what could be a wild ride when votes are tallied. The region, being an export powerhouse, has shares and currencies sensitive to changes in U.S. trade policies.

Money managers are shying away from outright wagers on the election outcome and instead reducing exposure to vulnerabilities from Japanese manufacturers to Hong Kong stocks, making bets on India or China that stand to gain regardless of the U.S. leader.

> "We actually view China as a decent place to hide," said Jon Withaar of Pictet Asset Management, citing domestic drivers.

He emphasized that the best course of action is to sit on the sidelines and wait, having already reduced bets in Japan and Hong Kong.

In the final stretch to the Nov. 5 election, betting odds show Republican Donald Trump leading Democrat Kamala Harris, influencing financial markets to sell U.S. bonds and buy dollars, anticipating that a Trump administration would boost inflation.

The low-yielding yen has become a preferred currency for selling against the dollar. Vantage Point Asset Management's Nick Ferres isn’t directly trading the election but maintains a short yen position and holds Japanese stocks.

> "Our sense is that the Donald is going to win and it might even be a Republican sweep," he stated, noting that Trump is more pro-growth, likely leading to higher rates.

The yen has dropped 6.5% against the dollar through October, marking the largest fall among G10 currencies.

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Investors are also looking for markets less exposed to tariff risks. The Singapore dollar appears stable against regional currencies, while Indian stocks may remain insulated due to strong domestic growth and low export exposure to trade conflicts.

> "India benefits from strong domestic economic growth, low exposure to potential trade conflict, and strong earnings in sectors not reliant on tech," remarked Ray Sharma-Ong of abrdn.

Despite polls showing a very close race, the lack of clear policy implications if there is a contested vote means uncertainty persists.

> "I honestly don’t know what Trump can achieve," stated John Hempton of Bronte Capital, suggesting caution in this unpredictable environment.

Still, Goldman Sachs noted an increase in exposure to China and North Asia among emerging market funds recently, indicating that momentum could pick up post-election.

> "We see emerging markets equities well-placed to outperform next year, regardless of the outcome," said Gary Tan of Allspring Global Investments, highlighting that a Harris win could be marginally positive for emerging markets.