ASIA MARKETS: Asian Markets Cool After Trump Pulls U.S. Out Of TPP
January 23 2017 - 11:02PM
Dow Jones News
By Kenan Machado
Stocks largely down amid fears of 'very major' border tax
Asian shares were lacking direction early Tuesday, as the
overnight decision by the U.S. to pull out of a regional trade
pact, as well as increased protectionist rhetoric, have largely
been priced in by the market.
Australia's S&P/ASX 200 was up 0.4%, while Hong Kong's Hang
Seng Index added 0.3%. The Nikkei Stock Average seesawed but was
last down 0.1%, and Korea's Kospi fell 0.2%.
On Monday, President Donald Trump officially withdrew his
country from the Trans-Pacific Partnership, a 12-nation trade deal
that he claimed would have cost the country its jobs. The move
fulfills one of his main campaign pledges.
However, of more concern to Asia was Trump's promise to impose a
"very major" border tax on companies that move some operations
overseas, a move that could also impact imports.
Trump has previously described his "border tax" as a selective
35% tax on companies that outsource production to other
countries.
Read:Japan says TPP 'meaningless' without U.S., but still hopes
to save pact
(http://www.marketwatch.com/story/japan-says-tpp-meaningless-without-us-but-still-hopes-to-save-pact-2017-01-23)
Any protectionist measures or a "border tax" will hurt companies
in Asia, said Willie Chan, a regional strategist at Maybank Kim
Eng. "It is going to impact the capital expenditure and credit
growth cycle in Asia," said Chan.
Trump's comments sent shares of key Asian exporters lower on
Tuesday. In Japan, Mitsubishi Motors (7211.TO) was down 1.8%, while
Mazda Motor (7261.TO) lost 2.2% and Nissan Motor (NSANY) was off
1.2%. In South Korea, Hyundai Motor (005380.SE) was down 1.7%.
Financial stocks in Japan also fell as investors flocked to buy
sovereign bonds to counter volatility, sending prices of such
instruments higher with yields trending lower. Yields are inversely
related to prices.
Among financial firms, Mitsubishi UFJ (MTU) was down 2.7%, while
Dai-ichi Life (8750.TO) lost 3.1%. The Topix sub index for banks
dropped 2.4%.
"We believe the president wants a U.S. manufacturing renaissance
and views a strong dollar as incompatible with this," said Tim
Condon, head of research for Asia at ING.
The U.S. dollar recovered slightly in early Asian trade Tuesday,
after declining overnight following the populist tone set by Trump.
The greenback's gains have lost steam as few details of Trump's
fiscal stimulus plans have been announced, while the president said
he would prefer a weaker dollar.
Meanwhile, the Shanghai Composite Index was flat as trading was
muted ahead of the week-long Chinese New Year holidays, set to
begin on Saturday.
For China, a failure of the TPP "will mean that those countries
will come closer to China," said Maybank Kim Eng's Chan.
To be sure, China is seeking to fill in the potential gap left
by the U.S. "If it's necessary for China to play the role of
leader, then China must take on this responsibility," said Zhang
Jun, head of the Chinese foreign ministry's office of international
economic affairs, on Monday.
(END) Dow Jones Newswires
January 23, 2017 22:47 ET (03:47 GMT)
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