US Fed Rate Cut Boosts Prospects for Asian Assets

The latest US Federal Reserve interest rate cut is considered a positive sign for Asian markets. Most Asian assets are believed to be under-represented, and have more scope for earning improvement and receiving the benefits of easing measures than many global counterparts. 

Analysts and fund managers believe that the 50-basis-point cut is less to do with ailing economy than with the need to avoid a hard landing for the US economy. This is believed to assist in dealing with some of the issues affecting Asian markets including high valuations and escalating trade tensions. 

Gary Dugan of Global CIO Office in Singapore said that the rate cut means that the Fed is willing to do everything to support the growth of the economy and this should be taken well by investors in Asia. After the announcement, regional stocks posted good gains, with the Japan’s Topix up by more than 2% and the MSCI by 1.3%, outperforming US markets. 

Asian currencies had a mixed bag of responses; however, most of the currencies have appreciated over the last month except for the Hong Kong dollar. The yen fell as investors await the next move from the Bank of Japan while regional bonds showed mixed performance even as US Treasury yields dropped.