Asia: Stocks drop as investors try to assess Trump presidency

[SYDNEY] Asian stocks fell for a second day as investors tried to gauge the impact of Donald Trump's likely policies on the region's markets. Tokyo shares rallied as economic growth beat estimates and the yen weakened.

The MSCI Asia Pacific Index dropped 0.3 per cent as of 11:42am in Tokyo, dragged down by Hong Kong, Australian, Malaysian and Indonesian markets. The Topix index advanced 1.4 per cent after Japan's economy expanded more than forecast in the three months through September and the yen dropped 0.7 per cent, boosting the outlook for exporters' earnings. A raft of data released Monday showed China's economy held ground in October following new measures to cool property markets in almost two dozen big cities.

Asian stocks are falling on speculation Mr Trump will take a more protectionist approach to trade and that his plans to increase spending in the US will push up inflation and result in a swifter pace of interest-rate increases by the Federal Reserve. Mr Trump's economic adviser, Anthony Scaramucci, repeated a pledge to spend US$1 trillion on infrastructure in a Financial Times comment piece over the weekend, while sounding a softer note on trade, suggesting the president-elect is open to negotiations before slapping barriers on imports.

"In the short-term the election of Donald Trump as president is causing a bit of uncertainty and markets tend to overreact to that," said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd, which manages about US$121 billion.

"I suspect the dust will settle down in the next couple of months and this sort of market overreaction will provide opportunities." While the value of equities worldwide swelled by more than US$1 trillion last week amid optimism a Trump presidency will boost US growth, the MSCI Emerging Markets Index posted its biggest weekly loss since May. There's now an 84 per cent chance the Federal Reserve will lift rates next month, Fed Funds futures show.

"Elevated risks around regional trade and security remain unresolved," said Matthew Sherwood, Sydney-based head of investment strategy at Perpetual Ltd, which manages about US$23 billion. "Emerging markets are suffering from the impact of higher US interest rates."

Japan's economy expanded by an annualised 2.2 per cent in the third quarter, faster than economists' estimates for 0.8 per cent growth, as a rebound in exports compensated for weak spending by consumers and companies.

"No doubt this is a solid reading," James Woods, Sydney-based investment analyst at Rivkin Securities, a brokerage, said by phone. "It's very encouraging to get such a good print on GDP, but the headwinds that the economy faces are still very significant. They really need to deal with the deflationary problems and that's a hard hole to dig themselves out of."

Hong Kong's Hang Seng Index dropped 1.3 per cent and the Hang Seng China Enterprises Index of mainland Chinese companies listed in the city retreated 1 per cent to head for a three-month low. The Shanghai Composite Index added 0.4 per cent.

Chinese industrial production rose 6.1 per cent from a year earlier in October, compared with a median estimate for 6.2 per cent in a Bloomberg economist survey and 6.1 per cent in September. Retail sales climbed 10 per cent while fixed-asset investment increased 8.3 per cent in the first 10 months of the year.

The Jakarta Composite Index fell 2.4 per cent following a 4 per cent plunge on Friday. The market remains tactically vulnerable if bond yields continue to rise and the currency weakens, Christopher Wood, chief equity strategist at CLSA Ltd in Hong Kong, wrote in a note released Monday.

Malaysia's benchmark measure lost 1.1 per cent as data from MIDF Amanah Investment Bank Bhd. showed foreign investors pulled 800.4 million ringgit from the nation's stocks last week in the third straight outflow. The Philippine Stock Exchange Index lost 1.3 per cent to the lowest level since March after falling 3.5 per cent last week.

Investors are concerned about the impact of a Trump presidency on the business-process outsourcing industry and remittances, said Robert Ramos, chief investment officer at Union Bank of the Philippines in Manila.

Australia's S&P/ASX 200 Index dropped 0.8 per cent, South Korea's Kospi index fell 0.2 per cent, Singapore's Straits Times Index slid 1 per cent and Taiwan's Taiex index decreased 0.2 per cent.

New Zealand's S&P/NZX 50 Index added 0.5 per cent, with construction company Fletcher Building Ltd pacing gains to rise 4 per cent, after an earthquake in the South island caused widespread damage and killed two people. Tower Ltd, an insurer, slumped 5.9 per cent.

E-mini futures on the S&P 500 index advanced 0.4 per cent. The underlying gauge rose 3.8 per cent last week, its biggest surge in more than two years.

BLOOMBERG